China’s economy grew more than expected in the third quarter | ET REALITY

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China’s economy grew more than expected over the summer, although the property market continued to weaken, while the government and the banks it controls poured money into infrastructure and new factories.

Data released Wednesday showed economic output rose from July to September compared with the previous three months. Industrial production of everything from chemicals to electric cars strengthened as the government built more roads, sewage lines and other public works and as state banks poured financing into factory construction.

For the past year and a half, China’s economy, the world’s second largest, has struggled. Home sales have slowed, leaving some of the biggest developers on the brink of insolvency. The country’s debt burden, which has increased over the past 15 years, continues to weigh on growth.

In the third quarter, from July to September, gross domestic product grew 1.3 percent compared with the previous three months, China’s National Bureau of Statistics said. For the second quarter, however, economic growth was revised downward to 0.5 percent.

When projected for the full year, third-quarter data indicates China’s economy was growing at about 5.3 percent, compared with an annual rate of 2 percent in the second quarter.

Consumer spending faltered in the spring, but appears to have stabilized in recent months. Retail sales rose 5.5 percent in September from the same month a year earlier, an acceleration from a 4.6 percent pace in August.

“It looks tentative, but better than three months ago,” said Meg Rithmire, an associate professor at Harvard Business School who specializes in the Chinese economy.

China is turning to a familiar playbook to stimulate growth, essentially continuing the heavy public spending it deployed during the pandemic. Local government debt issuance increased 4.2 percent in the first eight months of this year from the same period last year, but increased 59 percent compared to the first eight months of 2019.

Sheng Laiyun, deputy commissioner of the National Bureau of Statistics, said at a news conference that China’s economic performance so far this year “has laid a solid foundation” for continued growth. But he also warned that “the external environment is becoming more complex and severe while domestic demand remains insufficient and the foundations for economic recovery and growth need to be further consolidated.”

The housing market remains at the center of the economy’s deepest problems: A two-year decline in home prices has left families feeling less prosperous and, as a result, less willing to spend money. Weak demand for goods and services has left the economy on the brink of deflation. Consumer prices were unchanged in September from a year earlier, and wholesale prices charged by producers actually fell, according to government data released Friday.

Falling apartment prices have triggered a wave of insolvencies among property developers and the depressed construction industry, previously one of the country’s biggest industries. The statistics office said on Wednesday that investments in real estate development fell 9.1 percent in the first nine months of this year compared with the same period last year, even as investments in infrastructure and manufacturing capacity rose every a 6.2 percent.

According to the Tianjin Beike Research Institute, the average prices of existing homes in 100 Chinese cities have dropped 16 percent since August 2021.

Beijing officials have given local governments the green light to issue more bonds to pay for infrastructure projects. The state-controlled banking system has been providing loans to manufacturers so they can invest in more factories.

The goal has been to create jobs, in the hope that people will then spend more money. Unemployment has been very high among young people this year and the government stopped publishing the data in August. But overall urban unemployment fell in September to 5 percent, from 5.2 percent in August and 5.3 percent in July.

The loans are starting to help companies like Dalian Bingshan Group, a large manufacturer of commercial heating and cooling systems in the city of Dalian. “In Bingshan, we receive a lot of government support: financial support, political support,” said Ji Zhijian, president of the group.

China’s top leader, Xi Jinping, has cracked down in recent years on private sector companies in fields ranging from internet platforms to home tutoring. But he has shown signs of weakening in recent days as the economy continues to struggle, and he commented on Friday, during a visit to Jiangxi province, that he wanted to “promote the healthy development of the private economy.”

The main GDP figure reported by the government on Wednesday, comparing this summer with the same period last year, showed growth of 4.9 percent.

But a year ago, China’s economy was still struggling with “zero Covid” restrictions that included municipal lockdowns, mass quarantines and severe limitations on travel between provinces.

“It’s not fair to compare today’s economy to that of a year ago, when many in China were stuck at home, and that comparison also says little about where the economy is headed now,” said Diana Choyleva, chief economist at Enodo Economics. , a London research firm that focuses on China.

Even as China’s growth has slowed, its factories continue to churn out a torrent of goods. And with domestic growth slowing and local consumers wary of making big purchases, China is finding big markets abroad.

China is flooding the world with exported cars, both electric and gasoline.

Much of the merchandise goes to Europe. Before the pandemic, shipping statistics show, China exported 2.7 containers of goods to Europe for every container it imported. In recent months, China has been exporting almost four containers of goods for every container of imports.

But China’s rising exports are generating political tension. European officials are concerned about the trade imbalance. And the European Union has already launched an anti-subsidy investigation into China’s growing electric car exports, which could lead to tariffs next summer.

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