On October 18, China’s economic “third-quarter report” was released, revealing that the GDP in the first three quarters of 2024 grew by 4.8% year-on-year. Overall, the economy is operating smoothly with signs of progress. Notably, many production and demand indicators showed improvement in September, leading to a more optimistic market outlook and contributing positively to the economic recovery, indicating a stabilization trend.
Where can we see this “stabilization and recovery”?
— It’s evident in the marginal improvements across various indicators.
On the production side, both the industrial and service sectors showed signs of marginal improvement. In September, the industrial added value for large enterprises grew by 5.4% year-on-year, breaking a four-month decline, while the service production index increased by 5.1%, up by 0.5 percentage points from August.
On the demand front, both consumption and investment saw positive changes. Consumer potential continues to be unleashed, with policies supporting new sectors driving robust sales in home appliances and automobiles. In September, total retail sales of consumer goods rose by 3.2% year-on-year, up 1.1 percentage points from August. Similarly, investment growth stabilized, with fixed asset investment increasing by 3.4% year-on-year in the first three quarters, matching the rate from January to August.
— The changes are also evident in increased market activity.
One of the most tangible changes felt by the public is in the real estate market, which has seen a positive shift. “The number of project visits increased by 50% year-on-year, and transaction volume grew by 30%. We’re seeing a strong willingness among buyers to purchase homes,” a representative from a real estate project in Chongqing noted, commenting on the increased foot traffic in sales offices during the National Day holiday. The government’s recent policies aimed at stabilizing the market have clearly had an effect, with notable increases in demand for both new and second-hand properties.
Additionally, the stock market also showed renewed vigor. After a 15.3% decline in August, trading volume in the Shanghai and Shenzhen stock markets surged by 32.7% in September.
What is the reason behind this “stabilization and recovery”?
— It stems from the long-term positive fundamentals of the Chinese economy.
With GDP growth of 5.3% in the first quarter, 4.7% in the second, and 4.6% in the third, the economy has shown consistency despite some fluctuations in growth rates. Overall, the stability of the economy remains intact, with fluctuations staying close to the 5% growth target. Key factors such as employment and prices have remained stable, while international payments are essentially balanced. The foundations supporting the broader economy are solid.
In terms of sequential growth, GDP increased by 0.9% in the third quarter, marking the ninth consecutive quarter of positive growth since Q3 2022. “The favorable conditions for China’s economy—its solid fundamentals, vast market potential, resilience, and capacity for growth—have not changed.”
With strong fundamentals, the Chinese economy can withstand short-term fluctuations and continue to progress steadily along a path of high-quality development. The third-quarter report reveals a thriving new set of productive forces; for instance, investment in high-tech industries has maintained rapid growth, with the added value of high-tech manufacturing up by 9.1% year-on-year. There is also a noticeable focus on green development, with double-digit growth in the production of new energy vehicles, lithium batteries, and photovoltaic products. Furthermore, the high-level opening-up of the economy has created ample opportunities, as evidenced by the 6.2% year-on-year increase in goods exports during the first three quarters, solidifying the trend of high-quality, stable economic growth.
— This recovery also benefits from effective macroeconomic policies.
China faces complex external challenges and rising risks, while its economy is currently in a crucial phase of structural adjustment. In response to these changing conditions, the central government, under the leadership of Xi Jinping, has implemented timely and strategic macro-control measures. After a central Politburo meeting in late September, a series of stimulus policies accelerated, significantly boosting market confidence and stimulating economic activity.
With measures focused on counter-cyclical policy adjustments, expanding domestic demand, increasing support for businesses, stabilizing the real estate market, and revitalizing the capital markets, these policies cover various sectors including finance, consumption, investment, real estate, and employment. By aligning new measures with existing policies, China has established a robust synergy to promote high-quality development and support annual economic goals.
What will this “stabilization and recovery” lead to?
— It will result in sustained improvement in market expectations.
In September, the manufacturing Purchasing Managers’ Index rose to 49.8%, an increase of 0.7 percentage points from August, indicating a general improvement in economic sentiment.
Data from the National Development and Reform Commission revealed a 5.8% year-on-year rise in bidding projects related to enterprise expansion in the third quarter, with September seeing a spike of 28.4%, the highest growth rate of the year.
A survey of 100,000 large enterprises conducted by the National Bureau of Statistics indicated a 1.3 percentage point rise in the proportion of industrial enterprises expecting an optimistic business outlook for Q4. Following the introduction of the stimulus policies, Goldman Sachs raised its economic growth forecasts for China for 2024 and 2025.
In market economies, confidence is paramount. When expectations stabilize and confidence strengthens, it can unleash greater developmental momentum.
— It will also bolster confidence in meeting annual targets.
“As indicated by early October’s electricity consumption, shifts in production material prices, and consumer activity during the National Day holiday, the stabilization and recovery of the economy in Q4 is increasingly likely,” said Sheng Laiyun, deputy director of the National Bureau of Statistics.
The overall performance in the first three quarters has shown a steady path forward, with a growing accumulation of positive factors in September. Various indicators suggest that favorable conditions for driving the stabilization and recovery of the Chinese economy are increasing, and the trend observed in September is likely to continue into Q4.
Looking ahead, how should economic work proceed? By acknowledging challenges, maintaining confidence, focusing on key areas, and taking proactive measures, we can rise to the occasion.
“Walk the path, but exert effort along the way; engage with the heart, but aim for the peak without shying from labor.” By thoroughly implementing the central government’s decisions and focusing on the paramount task of high-quality development, we are well-positioned and confident to achieve our economic and social development goals for the year.