China’s economic growth picks up but remains weak due to lockdowns

BEIJING (AP) — China’s economic growth accelerated in the last quarter but remains among the weakest in decades as the ruling Communist Party tries to reverse a recession while enforcing virus and virus controls and a crackdown on debt in its vast housing stock

BEIJING (AP) — China’s economic growth picked up in the last quarter but remains among the weakest in decades as the ruling Communist Party attempts to reverse a recession while enforcing virus checks and a crackdown debt in its vast real estate sector.

The world’s second-largest economy grew 3.9% year on year in the three months to September, compared with 0.4% in the previous quarter, official data showed on Monday.

The announcement was scheduled for last week but postponed as the decision The communist party met re-appoint President Xi Jinping as leader.

Xi, the most powerful leader in decades, wants to play a bigger role in business and technology development. This prompted warnings stricter control of contractors that generate jobs and wealth will weigh on growth that was already in long-term decline.

The party gave Xi carte blanche by installing a decision of seven members Standing committee made up of its allies. Proponents of free enterprise, including Premier Li Keqiang, the party’s No. 2 until last week, were removed from the leadership.

The International Monetary Fund and private sector forecasters say the economy will grow only 3% this year. It would be the second weakest since the 1980s after 2020, when growth plunged to 2.4% at the start of the coronavirus pandemic.

Investors and the public have watched Congress for initiatives to stimulate the economy or reduce the impact of “Zero COVID” controls that are shutting down cities and disrupting business, but none have been announced.

The latest growth slump that began in mid-2021 is hurting China’s trading partners by lowering demand for imported oil, food and consumer goods.

The improvement is “primarily the result of more flexible anti-virus controls” that isolate individual buildings or neighborhoods instead of cities, ING’s Iris Pang said in a report. But she said more lockdowns are “always a big uncertainty”.

“This uncertainty means that the effectiveness of growth policy would be compromised,” Pang said.

Growth has slipped after debt controls that regulators fear are dangerously high caused a slump in property sales and construction, one of China’s biggest economic drivers. Economic growth fell to 4% year on year in the last quarter.

Beijing has low mortgage loan and local governments have taken over some unfinished projects to ensure buyers get apartments. But regulators sticking to debt limits have forced smaller developers out of business and caused some larger competitors to miss payments to bondholders.

The ruling party is enforcing “Zero COVID” despite rising costs and public frustration after the temporary shutdown of Shanghai and other industrial hubs. This has turned into protests in some regions at a time when other countries are relaxing virus controls.

For the first nine months of 2022, growth was 3% from a year earlier, compared to 2.5% in the first six months, but barely half of the official target of 5.5% of the ruling party. Leaders stopped talking about that goal but promised easier loans and other measures to spur growth.

Growth is “highly uneven” and supported by government spending on road building and other public works while consumer spending weakens, Macquarie’s Larry Hu and Yuxiao Zhang said in a report.

In September, retail sales growth fell to 2.5% from a year earlier, from 5.4% the previous month. Growth in manufacturing output accelerated from 4.2% to 6.3%.

Also on Monday, trade data showed export growth fell to 5.7% year-on-year in September from 7% the previous month. Imports increased by 0.3%.

“Most of the economy lost momentum last month,” Julian Evans-Pritchard of Capital Economics said in a report. “The situation seems to have worsened in October.”

Investments in infrastructure, mainly public funds, increased by 16% in September against 15% the previous month.

Repeated closures and uncertainty over business terms have devastated entrepreneurs. Small businesses and restaurants have closed. Others say they struggle to stay afloat.

Beijing is using cautious, targeted stimulus instead of general spending, a strategy that will take longer to show results, economists say. Chinese leaders fear that too much spending could drive up politically sensitive housing costs or corporate debt.


National Bureau of Statistics (in Chinese):

Joe McDonald, The Associated Press

Carol N. Valencia