China’s National Bureau of Statistics reports that GDP growth accelerated in the third quarter to an annual pace of 4.9 %. Even if there continues to be uncertainty about the exact figure, many other economic indicators and alternative calculations for measuring growth confirm the view that China’s economy has bounced back quickly. The economy is again humming with covid infections in check and many restrictions have been lifted. Investment demand, supported by central and local government stimulus measures, has been unleashed. Moreover, Chinese industry has successfully pivoted in reaction to the demand shifts caused by the covid pandemic by e.g. increasing production of personal protective equipment and telecommuting equipment, which have seen demand soar in many countries, not just China.
Looking at core sectors of the economy, industrial output and fixed investment both recovered quickly from the covid crisis, but in recent months their pace of growth has stabilised. Official figures show that utilisation of industrial capacity increased in the third quarter already to pre-crisis levels. However, lately recoveries in consumer demand and the service sector have become stronger. In the third quarter, consumption demand made a positive contribution to GDP growth, while after contracting in all previous months of this year, September retail sales grew by 2 % y-o-y in real terms. Recoveries in some of the large service sector branches such as the hotels and restaurants have proceeded slowly, with output remaining lower than a year ago.
Chinese GDP trend with supply-side contributions
Sources: China National Bureau of Statistics, CEIC and BOFIT.