China's economic growth in the July-September period reached its highest level of the year, sparking speculation that the economic slowdown seen in the first half might be over. The GDP grew by 7.8% year-on-year in the third quarter, but this growth was largely driven by investment rather than a significant boost in domestic demand, which the government had hoped to see. While many analysts welcome the recovery, concerns remain about whether this rebound is sustainable.
The following summarizes key insights from various analysts:
UniCredit analysts noted that China's economy is showing signs of recovery during the summer, but they question whether this momentum will continue. They expressed skepticism about whether the third quarter marks a true turning point toward a strong and lasting recovery. Recent data, including lower-than-expected industrial output and retail sales figures, suggest that the recovery may not be as robust as it appears. The National Bureau of Statistics also acknowledged that September’s growth rate declined slightly, signaling possible challenges ahead.
Steve Barrow from Standard Bank pointed out that while the third-quarter performance was positive, recent data has not been entirely encouraging. He highlighted that September’s economic indicators were weaker than expected, and the fourth quarter could see a continuation of the slowdown, with GDP growth potentially declining again.
Danish Bank raised doubts about the sustainability of China’s economic rebound. It noted that current growth is above the country’s potential level (estimated around 8%), and without a significant output gap, the pace of recovery is likely to be slow. As the impact of small-scale stimulus measures fades, growth is expected to slow down starting next year, peaking in the first quarter. If growth slows further, the Chinese government may need to adjust its monetary policy.
Nomura observed that many economic indicators in China have become more uncertain. The actual activity index has weakened, with industrial growth slowing to 10.2% in September from 10.4% in August. Fixed asset investment dipped slightly to 20.2%, and retail sales rose by 13.3%, below expectations and lower than the previous month’s 13.4%.
Marc Ostwald, a strategist at Monument Securities, questioned the accuracy of China’s GDP data, noting that the country released the data just 10 days after the end of the third quarter. Given China’s massive population and complex economy, such rapid reporting raises concerns about reliability.
Overall, while the GDP numbers are impressive—far exceeding those of many developed countries—the lack of improvement in domestic demand suggests that growth in the coming quarters may not be strong enough to sustain long-term stability.
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