China continues to bounce back2 min read . Updated: 20 Oct 2020, 06:17 AM IST
- Gross domestic product expanded 4.9% in the third quarter from a year ago, missing economists’ forecast for a 5.5% expansion
China’s recovery from the coronavirus pandemic continued in the third quarter and showed signs of broadening in September as consumer spending accelerated, keeping the economy on track to be the world’s only major one to grow this year.
Gross domestic product expanded 4.9% in the third quarter from a year ago, missing economists’ forecast for a 5.5% expansion. Both retail sales and industrial production gained momentum in September, reassuring markets that the recovery is on track.
The numbers show China’s early and aggressive containment of covid has set the economy up for a faster rebound than any of its peers. That’s a rare positive for a world economy still clawing its way out of its worst slump since the Great Depression—a revival further complicated by the resurgent virus in Europe and the US.
“It’s an encouraging and hopeful message for the rest of the world," said Rob Subbaraman, global head of macro research at Nomura Holdings Inc. in Singapore. “If you successfully handle the health crisis, your economy can recover."
Retail sales expanded 3.3% in September from a year ago, industrial production grew 6.9% and investment growth accelerated to 0.8% in the nine months to the end of the quarter. Strong import growth in the third quarter may have dented the GDP number, even though it’s broadly seen as a bullish sign for demand. Output expanded 0.7% in the year to date, meaning that the world’s second-largest economy has now regained all the ground it lost in the early months of the year.
Underpinning the recovery has been the containment of the virus that has allowed factories to quickly reopen and capitalize on a global rush for medical equipment and work-from-home technology. That export strength was offset by a recent increase in imports, depressing the contribution of net trade to output growth.
“That should not be viewed negatively," said Liu Peiqian, China economist at Natwest Markets Plc in Singapore, because the strong import growth suggests the recovery in underlying economic growth is accelerating.
The improving picture has come with relatively restrained government borrowing and central bank easing compared to China’s peers. Instead, the government has focused on targeted support for business and the central bank on keeping liquidity flowing; today’s readings suggest there’s no need to change tack.
Central bank governor Yi Gang said Sunday that China has “pro-active fiscal policy" and “an accommodative monetary policy to support the economy".
“Right now, China has basically got covid under control," Yi said in a webinar organized by the Group of 30. “In general, the Chinese economy remains resilient with great potential. Continued recovery is anticipated which will benefit the global economy."
Yet the recovery isn’t without its holes. Shoppers have spent about 7% less in the first nine months of the year compared to last year. Services including tourism, education and travel are continuing to lag.
“The economy is not entirely back in its strongest shape," Helen Qiao, chief Greater China economist at Bank of America, told Bloomberg Television. “The services sector is not doing that well."
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