China's economic growth slowed in third-quarter but beat forecasts

BEIJING: China’s economy grew more than expected in the third quarter, data showed Wednesday, but the reading was still below target and officials continue to face calls for more stimulus while struggling to contain an unprecedented property crisis.

The 4.9 percent expansion in July-September was helped by forecast-beating retail sales figures and follows a series of broadly positive readings that point to a period of stability following months of weakness despite the lifting of strict zero-Covid measures.

But authorities are still on edge over turmoil in the real-estate sector, which has long accounted for a quarter of the country’s gross domestic product, supports thousands of companies and is a major source of employment.

The industry enjoyed dazzling growth for decades, but the recent woes of key developers including Evergrande and Country Garden are now fuelling buyer mistrust while homes lie unfinished and prices plummet.

Country Garden, one of China’s biggest property firms and long believed to be financially sound, failed last month to repay interest on a loan totalling $15.4 million.

The group has been granted a 30-day grace period which ends on Wednesday, and risks default if it does not honour the repayment.

The country faced a “grave and complex international environment and challenging tasks in promoting reform, development and stability at home” in the first three quarters of 2023, the National Bureau of Statistics said on Wednesday.

Authorities have stepped up incentives for property purchases in recent months to reinvigorate the sector, but buyers remain cautious.

Households are watching their spending amid sluggish growth, which has hurt consumption this year, though a week-long national holiday in October helped boost spending on tourism and other services.

Retail sales, the main indicator of household consumption, rose a better-than-expected 5.5 percent on-year in September.

But the government continues to face calls for measures to rekindle the economy.

While leaders have unveiled a series of targeted stimulus for various sectors — particularly property — pressure is building on them to announce wider-ranging support.

The International Monetary Fund (IMF) on Wednesday called for China to implement a “comprehensive strategy to address problems in the real estate sector”.

“China’s weaker near-term growth outlook will weigh on regional growth,” it said, adding that the country’s debt-burdened property sector will be a drag on demand across the region.

Bloomberg News reported last week that Beijing was looking at issuing almost $140 billion in sovereign debt to boost the beleaguered economy, with cash would be spent on various projects.

However, observers say a blockbuster spending splurge similar to that unveiled in 2008 during the financial crisis was unlikely.

China is aiming for “around five percent” growth this year — from a low base last year when the domestic economy was paralysed by strict Covid restrictions.

Zhang Zhiwei, of Pinpoint Asset Management, said in a note he believed “the improvement in third-quarter economic data makes it less likely for the government to launch stimulus in the fourth quarter, as the growth target of five percent is set to be achieved”.

Last year, the economy grew three percent, far from the official target of 5.5 percent, and one of the slowest rates in four decades.