Growth is slowly recovering

CHINA - Report 31 Oct 2022 by FAN Gang and Chunyang Wang

Growth is slowly recovering, but pressure looms. In Q3, GDP rose 3.9% y/y, up 3.5 pps from Q2, mainly increased by infrastructure investment. Industrial output grew 4.8% y/y in Q3, up 4.1 pps from Q2. In particular, it rose 6.3% y/y in September, up 2.1 pps from August, leading the first three quarters’ industrial growth to rise 3.9% y/y, up 0.5 pps from H1.

Investment rose 5.9%, up 0.1 pps from January to August, and has been rising for two consecutive months. Infrastructure investment was strong. From January to September, infrastructure investment has kept rising, and its growth rate reached 8.6% y/y. In September alone, it rose 16.3% y/y. The real estate market is still cooling. Investment in that sector fell -8% y/y, down 0.6 pps from January-August.

Consumption is weak. Retail sales of consumption goods rose 0.7% y/y in January-September, up 1.4 pps from H1, benefiting from last year’s low base number. Consumption rose 2.5% y/y in September, down 2.9 pps from August. The household survey suggests that consumption growth will fall further.

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