China’s Economic Growth Slows to 4.6%
On October 18, China announced its slowest growth in a year and a half, with the economy expanding by 4.6% in the third quarter of the year. This growth rate was slightly higher than the 4.5% forecasted in a Reuters poll but lower than the 4.7% pace in the second quarter.
Policy Stimulus and Future Outlook
- Authorities have increased policy stimulus measures since late September but are yet to provide specifics on the size of the package and a clear roadmap for long-term economic stability.
- Officials are confident that the economy can achieve the government’s full-year growth target of around 5% with further policy support and potential cuts to bank reserve requirements.
- Industrial output and retail sales data for September exceeded expectations, but the struggling property sector continues to highlight the need for additional support.
Property Sector Woes
With 70% of Chinese household wealth tied to real estate, weak consumption has impacted businesses across various sectors. Major companies like EssilorLuxottica have reported revenue declines due to subdued consumer demand in China.
Challenges in the Property Market
- Despite multiple rounds of policy support, China’s new home prices fell at the fastest rate since May 2015, suggesting a lack of revival in the property market.
- Other indicators, such as declining crude steel output and slowing export growth, further highlight challenges in key sectors of the economy.
Market Response and Policy Measures
Following the latest data release, market reactions were mixed, with investors responding positively to central bank announcements of additional support for the stock market.
Assessing Policy Support
- Policymakers have shifted focus towards stimulating consumption, with aggressive monetary support measures announced in late September.
- Investors are eager for more details on the overall size of the stimulus package and a clear plan to reignite broader economic growth.
- Observers emphasize the need for addressing structural challenges like overcapacity, high debt levels, and an ageing population for sustained growth.
Analysis
China’s economic growth slowdown and challenges in key sectors like real estate and exports have raised concerns about the effectiveness of recent policy measures. While short-term stimulus efforts have provided some support, addressing long-term structural issues is crucial for sustainable growth.
Investors and policymakers alike will need to closely monitor developments in the Chinese economy to navigate potential risks and opportunities in the coming months.