China Q3 GDP growth tops forecasts but meaningful rebound elusive

BEIJING, Oct 24 (Reuters) – China’s economy rebounded at a faster-than-anticipated clip in the third quarter, but a more robust revival in the longer term will be challenged by persistent COVID-19 curbs, a prolonged property slump and global recession risks.

Helped by a raft of government measures, gross domestic product of the world’s second-biggest economy expanded 3.9% in July-September from a year earlier, official data showed on Monday, outstripping the 3.4% pace forecast in a Reuters poll and faster than the 0.4% growth in the second quarter.

But towards the end of the quarter, domestic demand again waned as a summer flare-up in coronavirus cases led to lockdowns and curbs, while export growth slowed and the key property sector further cooled, pointing to a fraught path to recovery.

Further clouding the outlook, China looks set to continue with its ultra-strict COVID policies endorsed by the ruling Communist Party, which wrapped up its top leadership reshuffle on Sunday with Xi Jinping securing his third term at its helm.

The new line-up of China’s top governing body has heightened fears among investors President Xi will double down on ideology-driven policies at the cost of economic growth.

“There is no prospect of China lifting its zero-COVID policy in the near future, and we don’t expect any meaningful relaxation before 2024,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“Recurring virus disruptions will therefore continue to weigh on in-person activity and further large-scale lockdowns can’t be ruled out.”

Hong Kong shares slid to 13-year lows and the onshore yuan fell to its weakest level in 15 years on concerns over the economy.

Final consumption accounted for 2.1 percentage points of the 3.9% GDP growth, while capital formation, or investment, and net exports accounted for 0.8 and 1.1 percentage points, respectively.

In the nine months to September, China’s inflation-adjusted urban per capita consumption fell 0.2% on year.

The data was originally scheduled for release on Oct. 18 but was delayed amid the key Communist Party Congress last week.

On a quarterly basis, GDP rose 3.9% versus a revised drop of 2.7% in April-June and an expected 3.5% rise.

The economy was buoyed by manufacturing, with separate data showing industrial output in September rose 6.3% from a year earlier, beating expectations for a 4.5% gain and 4.2% in August.

Aside from the domestic risks, China’s economy will be pressured externally by the Ukraine crisis and a global slowdown due to interest rate hikes to curb red-hot inflation.

A Reuters poll forecast China’s growth to slow to 3.2% in 2022, far below the official target of around 5.5%, marking one of the worst performances in almost half a century.

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