China’s economy is expected to show signs of a slowdown in the third quarter, reflecting persistent weak demand despite increased government stimulus efforts to meet annual growth targets.
The world’s second-largest economy struggled in the second quarter, following a brief post-COVID rebound. Factors such as a property market decline and mounting debt from a long-lasting infrastructure boom contributed to this slowdown.
To combat this, the government has recently introduced a series of measures, including increased public spending on infrastructure, interest rate cuts, property market adjustments, and support for private businesses.
Economists surveyed by Reuters anticipate that the Gross Domestic Product (GDP) likely grew by 4.4 percent year-on-year in the July-September period, a slowdown from the 6.3 percent growth in the second quarter. Official GDP data is scheduled for release on Wednesday, at 0200 GMT.
Separate data on economic activity in September is also expected to reveal an increase in retail sales growth while factory output slows. Although there have been some signs of stabilization following recent economic support measures, experts believe additional actions are necessary to sustain economic activity.
Economic growth is projected to accelerate to 4.9 percent in the fourth quarter. Nevertheless, China’s exports and imports continue to decline, and despite increased bank lending, ongoing deflationary pressures highlight the difficulties faced by policymakers in revitalizing the economy.
Economists maintain concerns about the struggling property sector, employment rates, household income, and low confidence among some private companies. It is noted that Beijing may be adopting a “wait-and-see” approach to assess the effects of recent stimulus measures.
On a quarterly basis, GDP is anticipated to increase by 1.0 percent in the third quarter, a slight improvement from the 0.8 percent growth in April-June. The year’s economic growth is predicted to reach 5.0 percent, broadly aligning with Beijing’s full-year target, before slowing to 4.5 percent in 2024.
Last year, the economy expanded by only 3 percent, falling significantly short of the government’s official target due to COVID-related restrictions.
According to the Reuters poll, economists anticipate that the central bank will maintain banks’ reserve requirement ratio (RRR) and benchmark lending rates steady for the remainder of the year. Beijing may increase fiscal stimulus to stabilize economic activity, although the benefits may not become apparent until well into 2024.
Monetary policy adjustments are limited by concerns about weakening the yuan, which has depreciated by 5.7 percent this year. The central bank previously reduced the RRR in September to bolster liquidity and support the economic recovery, marking the second cut of the year.