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China Q3 Economic Data (October 2023)

Andrew Hencic, Senior Economist 

Date Published: October 18, 2023


China's GDP Beats Expectations – Rising 4.9% in Q3

  • China's third quarter GDP grew 4.9% compared to the third quarter of 2022, beating expectations for a 4.5% year-over-year (y/y) expansion. On a quarterly basis the economy gained steam, rising 1.3% quarter-on-quarter (q/q), an acceleration from the downwardly revised 0.5% expansion (previously 0.8%) in the second quarter. 
  • Retail sales surprised to the upside as well, rising 5.5% y/y versus consensus expectations for a 4.9% gain.  
  • Industrial production grew roughly in line with expectations in September, registering 4.5% y/y against expectations for a 4.4% advance. 
  • Fixed asset investment also came in roughly in line with expectations, with total investment through the first nine months of the year registering 3.1% higher than in 2022. The real fly in the ointment is the ongoing struggles in the property sector where investment through September is 9.1% lower year-to-date (YTD) than last year – falling short of the 8.9% contraction consensus had expected.
  • In line with the better-than-expected economic data, the urban unemployment rate fell to 5.0% from 5.2% in August.

Key Implications

  • Today's release is a pleasant surprise as authorities have worked to stem the economy's struggles and restore a healthy growth trajectory. With this print, absent a steep deceleration in fourth quarter growth, meeting the 5.0% annual growth target for 2023 is all but assured. The uptick in retail sales in particular comes as a pleasant surprise as restoring consumer confidence and vitality is going to be a crucial step to a sustained recovery. 
  • While there were certainly some elements to cheer in the report, the persistent structural issues are reason for concern. The property market continues to struggle, weighing on prospects heading into next year. Moreover, the falling GDP deflator (-1.4% y/y) reflects an economy still dealing with excess capacity. This report provides some encouraging signals heading into the end of the year, but also serves to highlight the issues that continue to require attention.