China's economic growth in July-September reached a notable high for the year, leading some to speculate that the economic slowdown in the first half might have ended. The GDP grew by 7.8% year-on-year in the third quarter, but this growth was primarily driven by investment rather than the domestic demand that the government had hoped to see. While analysts welcome the recovery, many express concerns about whether this rebound is sustainable.
The following summarizes the views of various analysts:
UniCredit analysts noted that the Chinese economy is showing signs of recovery this summer, but they remain skeptical about whether this momentum will continue. They questioned if the third quarter truly marks a turning point toward a strong and sustainable recovery. They pointed out that recent industrial output and retail sales figures were lower than the previous month, and the National Bureau of Statistics acknowledged that September’s growth rate declined. This could signal that the rebound may not last. Although current stimulus measures are supporting short-term growth, the overall trend remains downward, influenced by both cyclical and structural factors.
Steve Barrow from Standard Bank also highlighted that while the third quarter performed well, recent data is not very encouraging. September’s numbers were weak, and the statistics office admitted that the growth rate dropped. He expects the fourth quarter to continue the slowdown, with GDP growth likely to fall again.
Danske Bank raised doubts about the sustainability of China’s economic rebound. They noted that the current growth rate is above the potential level (estimated around 8%), and without a significant output gap, the recovery is expected to be slow. As the impact of small-scale stimulus measures fades, growth is likely to slow starting early next year, peaking in the first quarter. If growth continues to decline, the government may be forced to tighten monetary policy.
Nomura pointed out that the outlook for many economic indicators in China has become uncertain. They noted that actual activity indices have weakened. Industrial growth fell to 10.2% in September from 10.4% in August, in line with expectations. Fixed asset investment dipped slightly from 20.3% in August to 20.2%, and retail sales rose by 13.3%, below expectations and slightly lower than August’s 13.4%.
Marc Ostwald from Monument Securities commented on the speed at which China released its GDP data—only 10 days after the end of the third quarter. Given China’s large population of 1.3 billion, questioning the accuracy of such data is understandable.
From the analysts' comments, it's clear that while the GDP performance is impressive—far surpassing many developed countries this year—the lack of improvement in domestic demand suggests that growth in the coming quarters may not be sufficient to sustain long-term stability.
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