China's Q3 GDP shows weakest pace since 2023, backs calls for more stimulus

China's export growth slowed sharply in September while imports also decelerated, undershooting forecasts by big margins and suggesting manufacturers are slashing prices

China's economy grew at the slowest pace since early 2023 in the third quarter, and though consumption and factory output figures beat forecasts last month a tumbling property sector remains a major challenge for Beijing as it races to revitalise growth.
 

Authorities have sharply ramped up policy stimulus since late September, but markets are waiting for more details on the size of the package and a clearer road map to put the economy back on a solid longer-term footing.
 

The world's second-largest economy grew 4.6 per cent in July-September, official data showed, a touch above a 4.5 per cent forecast in a Reuters poll but below the 4.7 per cent pace in the second quarter.
 

 

"China's Q3 2024 data is not a turn-up for the books," said Bruce Pang, Chief Economist at JLL. "The performance aligns with market expectations, given the weak domestic demand, a still struggling housing market, and slowing export growth." "The stimulus package announced at the end of September will take time and patience to boost growth over the next several quarters," he added.
 

Officials addressing a post-data press conference on Friday expressed confidence the economy can achieve the government's full year growth target of around 5 per cent, underpinned by further policy support and another cut to the amount banks must hold in reserve.
 

"Based on our comprehensive assessment, the economy in the fourth quarter is expected to continue the stabilisation and recovery trend that occurred in September. We are fully confident in achieving the full-year target," Sheng Laiyun, deputy head of China's statistics bureau, told reporters.
 

Policymakers could take some comfort in forecast-topping industrial output and retail sales data for September, but the property sector continued to show sharp weakness and underline markets' calls for more support steps.
 

"I doubt that these numbers are affected by stimulus announced in September," said Shane Oliver, Chief Economist at AMP. "It doesn't really change the story much on China. It's continuing to grow, but at a pretty subdued pace by historical standards."

A Reuters poll showed China's economy is likely to expand 4.8 per cent in 2024, undershooting Beijing's target, and growth could cool further to 4.5 per cent in 2025.
 

Property Pains
On a quarterly basis, the economy expanded 0.9 per cent in the third quarter, compared with 0.7 per cent growth in April-June, and below forecast of 1.0 per cent.
 

With 70 per cent of Chinese household wealth held in real estate, a sector that at its peak accounted for a quarter of the economy, consumers have kept their wallets shut tight.
 

The frail consumption has taken a toll on many businesses, with major Franco-Italian eyewear maker EssilorLuxottica just one of many in the firing line. The makers of Rayban and Oakley brands reported it had missed third quarter revenue expectations dragged by weak consumer demand in China.
 

Worryingly, there were few signs of a property market revival despite several rounds of policy support measures over the past year, with separate data on Friday showing China's new home prices fell at the fastest pace since May 2015.
 

China's crude steel output in September slid for a fourth month, missing expectations of a rebound in purchases of the construction commodity.

 

Cracks have also started to appear in the key export sector, a lone bright spot in the economy, with shipment growth slowing sharply in September.
 

Markets were choppy following Friday's burst of data, with investors pushing the blue-chip CSI300 Index up 0.63 per cent and the Shanghai Composite Index up 0.56 per cent on a central bank announcement of more support for the equity market.
 

Policy Support missing mark?

Policymakers, who have traditionally leaned on infrastructure and manufacturing investment to drive growth, have pledged to shift focus towards stimulating consumption.
 

The central bank in late September announced the most aggressive monetary support measures since the COVID-19 pandemic, including interest rate cuts, a 1 trillion yuan liquidity injection and other steps to support the property and stock markets.
 

However, the numerous steps have still left investors waiting on details of the overall size of the stimulus package and a clear road map to reignite broader growth.
 

China observers have also repeatedly highlighted the need for authorities to address longer-term structural challenges such as overcapacity, high debt levels and an ageing population.
 

"China has started to roll out a flurry of stimulus measures since last month. I'm not sure if those measures are sufficient or not," said Toru Nishihama, Chief Economist, Dai-Ichi Life Research Institute in Tokyo.
 

"What I can say is that Chinese authorities are missing the mark - they are not doing what should be done while leaving structural problems unattended."

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