China’s economic rebound shows upside to ‘stringent lockdowns, testing, tracking’, analysts say

Recovery in world’s second-largest economy looked more balanced in the third quarter of 2020, with services gaining momentum and growth set to continue into 2021

Questions raised about historical revisions to economic data, even if general consensus is that China’s economic rebound is genuine

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China’s economy looks more balanced than it did in the first half of 2020, when factories pumped out supply even as consumer demand struggled to keep pace amid the coronavirus pandemic. Photo: Bloomberg

Published: 8:00pm, 19 Oct 2020Updated: 11:31pm, 19 Oct 2020

Powered by an early and severely enforced spate of lockdowns, nationwide test-and-trace campaigns, and a huge domestic market that has finally started to deliver a rebound in consumption, China’s economic recovery from the coronavirus pandemic continued in the third quarter – albeit at a slower pace than economists had expected.

The economy expanded by 4.9 per cent between July and September, compared with a year earlier, driven by an uptick in the services sector and consistent strength in trade and industry.

Monday’s figures provide the final comprehensive snapshot of the Chinese economy ahead of the fifth plenum of the 19th Party Congress later this month, when hundreds of Central Committee members of the ruling Communist Party will endorse the country’s 14th five-year plan for 2021-25. In this regard, the strong growth momentum will be viewed as politically significant.

China was the first economy to enter the pandemic and is the first major one to emerge from it, with a number of relatively smaller outbreaks having been swiftly dealt with by authorities. It is also the only G20 economy expected to grow this year, according to the International Monetary Fund.

Economists had expected growth of more than 5 per cent, suggesting “the market had become too optimistic about the Chinese economy after the strong rebound in the second quarter”, said Zhou Hao, senior emerging markets economist at Commerzbank.

“The Chinese economy basically completed its recovery in the second quarter, so it is natural that the quarter-on-quarter growth rate would decline sharply,” said Zhou, who pointed out that the pace of quarterly growth had dipped to 2.7 per cent between the second and third quarters, after reaching 11.5 per cent between the first and second quarters.

Nonetheless, China’s economy looks more balanced than it did in the first half of 2020, when factories pumped out supply even as consumer demand struggled to keep pace. In September, retail sales grew at the fastest pace since December, while industrial production reported its fastest year-on-year expansion for 18 months.

As Western economies continue to veer in and out of partial lockdowns, with fresh spikes in coronavirus infections across Europe and the United States, the contrast with China and other economies that pursued early and consistent measures in dealing with the virus is becoming starker.