China’s third-quarter GDP surprises, casting doubt on an easing of zero-Covid strategy

Stronger-than-expected economic growth was seen despite weakening retail sales, with industrial production faring better than expected

‘Notable downward pressures’ are still holding back a full economic rebound, and ‘the outlook remains gloomy’ with trade growth at risk, economists say

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China’s retail sales missed expectations in September, rising by only 2.5 per cent, year on year. Photo: EPA-EFE

Published: 7:59pm, 24 Oct 2022Updated: 8:29pm, 24 Oct 2022

China’s better-than-expected economic growth in the third quarter still heralds a “gloomy” road ahead after a “bumpy” recovery, analysts warn, noting fresh signs of weakening momentum amid mixed views following the leadership reshuffle during the 20th party congress.

The world’s second-largest economy grew by 3.9 per cent in the third quarter, year on year, up from the 0.4 per cent growth seen in the second quarter, delayed data released on Monday showed.

Industrial production was also stronger than expected, but retail sales missed expectations, highlighting how the “details of the data suggest that the growth remains highly uneven”, said Larry Hu, chief China economist at Macquarie Group.

The headline figure, though, might help ease market concerns after the decision to delay the release of the data from during the 20th party congress last week sparked fears of the worse-than-expected economic output in the third quarter, Hu added.

“September activity data presented a significant divergence amid tighter Covid controls, a prolonged property downturn, weakening export growth and continued policy stimulus,” said economists at Goldman Sachs.

“Real [gross domestic product] growth rebounded to a stronger-than-expected 3.9 per cent … reflecting a bumpy growth recovery from the stringent Covid lockdowns in April-May amid multiple headwinds.”

Industrial production, a gauge of activity in the manufacturing, mining and utilities sectors, beat expectations and grew by 6.3 per cent in September from a year earlier, up from 4.2 per cent growth in August.

But retail sales rose by only 2.5 per cent in September, year on year – down from 5.4 per cent growth in August and missing expectations.