Chinese economy continues on recovery road

Huang Yixuan
Positive growth for the first three quarters of the year reverses the negative figure recorded in the first half of 2020 following the outbreak of COVID-19.
Huang Yixuan

China's economy saw a further recovery in September, especially in the services sector, with positive growth for the first three quarters that was reversing the negative figure for the first half of 2020.

The nation's gross domestic product in the first three quarters reached 72.28 trillion yuan (US$10.8 trillion), an increase of 0.7 percent from the same period last year, according to the National Bureau of Statistics onon Monday. 

The first quarter saw GDP tumbling 6.8 percent year on year due to the COVID-19 pandemic. The second quarter then started to recover, with a 3.2 percent rebound, while GDP for the July-September period grew by 4.9 percent.

September activity data suggested the pace of recovery of major economic activity was on track. 

Growth of industrial production and retail sales quickened to 6.9 percent and 3.3 percent year on year in September from 5.6 percent and 0.5 percent in August.

In the first three quarters, Chinese authorities coordinated pandemic prevention and control work and promoted economic and social development, said Liu Aihua, a spokeswoman for the NBS.

"China’s quick recovery was a product of its stringent lockdowns, massive testing, population tracking, a large economy that can afford to be somewhat insulated, and fiscal stimulus via credit expansion," said Lu Ting, chief China economist of financial services company Nomura.

Strong export growth, a further recovery from the pandemic, the lagged impact of fiscal stimulus and credit growth and pent-up demand following the summer floods all contributed to the robust activity data in September, Lu added.

Industrial output rose further by 6.9 percent year on year in September from 5.6 percent in August, much stronger than market expectations. Among upstream sectors, year-on-year industrial production growth in the manufacturing and mining sectors rose to 7.6 percent year on year and 2.2 percent in September from 6 percent and 1.6 percent in August, while industrial output growth in the utilities sector fell to 4.5 percent year on year from 5.8 percent over the same period.

In the first nine months, industrial production rose 1.2 percent year on year, compared with the 1.3 percent decline in the first half. The third quarter’s year-on-year increase of 5.8 percent, which was 1.4 percentage points faster than that in the second quarter, mainly offset the first quarter’s 8.4-percent slump.

Production in the services sector, meanwhile, rose 4.3 percent in the third quarter year on year, compared with the 1.9 percent growth in the first quarter. 

Modern services industries showed strong growth momentum in January-September, Liu said. Production of the information transmission, software and information technology services sector, and the financial services sector increased by 15.9 percent and 7 percent, up 1.4 percentage points and 0.4 percentage points from the first half.

The bureau also highlighted the recovery in retail sales, especially the rapid growth in online retail.

Headline retail sales growth in nominal terms rose significantly to 3.3 percent year on year in September from 0.5 percent in August, stronger than the market consensus. In real terms (excluding price factors), retail sales growth jumped to 2.4 percent year on year in September from the 0.6 percent drop in August, the first positive monthly print this year.

For the first quarters, retail sales added up to 27.33 trillion yuan, down 7.2 percent year on year but the drop was largely narrowed from the 11.4 percent decline in the first half of 2020. 

The figure for the third quarter grew 0.9 percent from a year earlier, which was this year's first positive quarterly growth in retail sales.

"We expect retail sales growth to gradually recover further in coming months barring a second wave of COVID-19 in China," Nomura's Lu said.

Fixed-asset investment growth, however, moderated on weaker infrastructure and manufacturing investment, inching down to 7.5 percent year on year in September from 7.6 percent in August, taking its year-to-date growth to 0.8 percent year on year.

"The September moderation was led mainly by infrastructure and manufacturing investment. However, we expect infrastructure investment to accelerate, as the government could ramp up its spending of the proceeds from bond issuance in previous months, while manufacturing investment may remain subdued amid elevated uncertainties surrounding US-China relations," Lu said.

The bureau's Liu said stabilizing employment is one of the key tasks for the year. In the first nine months, 8.98 million new urban jobs had been created nationwide, achieving 99.8 percent of the target for the year. 

In September, the unemployment rate in the national urban survey was 5.4 percent, 0.2 percentage points lower than in the previous month. The 31 major cities surveyed posted an unemployment rate of 5.5 percent, down 0.2 percentage points from August. By the end of the third quarter, there were 179.52 million rural migrant workers.

"In general, China's economy did show a sustained and steady recovery in the first three quarters of this year. However, while we fully see an improving trend, we should also be reminded that the current epidemic situation outside China is still severe and the international environment is unstable and uncertain," Liu said.

For the next stage, Liu highlighted the importance of further ensuring stability and security, deepening reform and opening-up, helping enterprises alleviate difficulties, smoothing the economic cycle, and laying a solid foundation for ensuring people’s livelihoods, striving to achieve the goals and tasks of economic and social development for the year.

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