China’s economic growth has stabilized thanks to rising consumer demand. The gross domestic product (GDP) rose by 4.9 percent from July to September compared to the previous year, as the statistics office announced on Tuesday. Growth was therefore above the average forecast of 4.5 percent by economists surveyed by the Bloomberg news agency.
Retail sales in particular exceeded expectations with an increase of 5.5 percent. For example, Chinese consumers spent more money on restaurants, clothing and cars. But there can be no talk of exuberance: the hoped-for tourism boom largely failed to materialize during the national holiday at the beginning of October. According to economists, the risks of a further fall in consumer prices, the so-called deflation, which leads to less demand, remain.
The economic figures for the third quarter had “created a solid basis for achieving the development goals for the entire year,” said the statistics office. After the last, catastrophic zero-Covid year, the government had set a cautious target of around five percent for 2023. However, the office warned of an “even more complicated and difficult” global environment. On the one hand, the war in Ukraine and high inflation continue to weigh on demand for Chinese exports in Europe and the USA. And with the war in Israel and the growing tensions in the Middle East, further trouble now threatens.
The important real estate sector remains a significant burden. Home sales continue to decline and many property developers are feeling a credit crunch. What was once the country’s largest real estate developer, Country Garden, is under particular scrutiny. He had warned that he might not be able to service a US dollar bond that was due in the near future. The already insolvent competitor Evergrande is threatened with the once unthinkable liquidation of its assets at a court hearing at the end of the month. That would ultimately drive the ailing giant, which has become a symbol of the Chinese real estate crisis, into ruin.
Given the risks to the world’s second-largest economy, analysts expect further stimulus measures from the government. According to Bloomberg, the authorities are considering issuing more government bonds to invest in infrastructure. Economists also expect the central bank to further cut interest rates and the banks’ reserve requirement ratio. This should make it easier for companies to get fresh money for investments. But the success of these measures depends on whether the government manages to restore consumer confidence in the domestic economy.