China’s economy grew above expectations in Q3, but outlook remains clouded

China’s economic growth accelerated above expectations in the third quarter, expanding by 3.9% in the July-September period, after the economy grew by 0.4% in the second quarter and beating forecast for 3.4% expansion.

A stronger than expected rebound was helped by a number of government measures, which boosted growth in industrial activity to 6.3% in September, compared to the same period last year, well above expectations for a 4.5% gain and 4.2% expansion in August.

Economists remain cautious despite upbeat Q3 figures, as China is likely to continue its zero-tolerance Covid policy until at least 2024.
Recent lockdowns in a number of regions in the first six months of the year, significantly slowed economic growth of the second largest world economy.

Also, fading domestic demand, slowdown in export growth and further cooling in key property sector, present the major threats to economic growth in coming months.

Analysts are also concerned about global recession risks, as major central banks aggressively hike interest rates in attempts to bring soaring inflation under control that started to slow global economic growth, prompting economists to downgrade forecasts for China’s economic growth in 2022 from initial 5.5% to 3.2%, the worst performance in more than a four decades.

Separate data showed that China’s retail sales by only 2.5% in September, after growing by 5.4% in August and strongly undershooting expectations for 3.3% growth, with the strongest contribution seen from catering sales which dropped by 1.7% in September after growing 8.4% previous month, mainly due to Covid restrictions.