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October 20, 2020

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Economic recovery speeds up in Q3

CHINA’S economy powered ahead in the third quarter, data showed yesterday, building on a strong recovery from coronavirus lockdowns, while the country’s crucial army of consumers picked up their spending last month as they grow more confident. 

Gross domestic product expanded 4.9 percent year on year in the quarter, faster than the 3.2 percent growth seen in the second quarter, data from the National Bureau of Statistics showed yesterday.

In the first three quarters, the country’s GDP grew 0.7 percent year on year, returning to growth after the 1.6 percent contraction in the first half of the year and the 6.8 percent slump in the first quarter, the data showed.

To soften the impact of the COVID-19 shock, the government has rolled out a raft of measures, including more fiscal spending, tax relief, and cuts in lending rates and banks’ reserve requirements, to stabilize growth and employment.

As the epidemic is largely brought under control domestically, factories and schools have reopened and tourist sites across the country have resumed their usual hustle and bustle.

In the third quarter, major indicators returned to positive territory, with industrial output rising 5.8 percent and retail sales reporting the first quarterly expansion this year, up 0.9 percent.

Retail sales of consumer goods climbed 3.3 percent year on year in September, with the growth further picking up after the major consumption gauge posted its first positive growth this year in August by rising 0.5 percent annually.

In the travel sector, domestic passenger flights in September beat their COVID-19 levels, a sign that the segment is approaching full recovery, even as international borders remain largely shut.

The value of auto sales increased 11.2 percent year on year in September, maintaining double-digit growth for three consecutive months. Wen Bin, a chief analyst at China Minsheng Bank, said auto sales have provided a major boost to consumer sales.

Online spending grew 9.7 percent for the January-September period, accelerating from the 7.3 percent rise registered in the first half. Online sales of physical goods, which account for 24.3 percent of the total retail sales, surged 15.3 percent from one year earlier.

Broader investment

The country’s fixed-asset investment went up 0.8 percent year on year in the first three quarters, reversing a decline of 3.1 percent in the first half of this year. In the property sector, investment rose 12 percent in September from a year earlier, the fastest pace in nearly one and half years, providing a key support for broader investment.

Per capita disposable income rose 0.6 percent in the first nine months, compared with a 1.3 percent fall in the first half.

China’s surveyed unemployment rate in urban areas stood at 5.4 percent in September, 0.2 percentage points lower than that of August. A total of 8.98 million new urban jobs were created in the three quarters, completing 99.8 percent of the annual target, the NBS said.

“Seen from the trends of the key indicators, China’s epidemic prevention and economic recovery are at the world’s forefront, which shows the strong resilience and vitality of the economy,” said Liu Aihua, the NBS spokesperson.

Among the bright spots, new growth drivers, including the Internet-powered economy and new infrastructure, have assumed a bigger role in boosting growth, and the contribution of domestic demand is steadily picking up, she noted.

The breakdown of GDP showed final consumption accounted for 1.7 percentage points growth, while capital formation accounted for 2.6 percentage points and net exports contributed 0.6 percentage points, the NBS said.

“The unleashing of the potential of China’s super-large market not only demonstrates its basic strategy of expanding domestic demand, but will also facilitate the recovery of the global economy,” Liu stated.

Despite the across-the-board improvements, the basis for sustainable recovery requires further consolidation due to global uncertainties and uneven performance at home, she warned, highlighting the pressure in forestalling virus cases from abroad and preventing a resurgence at home.

In the latest World Economic Outlook report released earlier this month, the International Monetary Fund projected China’s economy to grow by 1.9 percent in 2020, making it the only major economy that will see positive growth this year.

For future policy moves, China should maintain the stability and continuity of macro-control policies to consolidate the foundation for sustained recovery, while further increasing policy support for key areas and weak links to achieve development goals and tasks for the whole year, Minsheng Bank analyst Wen said.

In a research report on the data, Lu Ting, chief China economist with Nomura, said that China will neither add more easing measures nor start tightening in the near term.

China will carry out what it planned in late May for the scheduled budget and government bond issuance, while on monetary and credit policies, the period of quickly accelerating credit growth is over, the report said.

“We do not expect any reserve requirement ratio cuts or rate cuts before end-2020, but expect some more liquidity injections via low-profile channels such as medium-term lending facilities and relending,” it noted.


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