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The Chinese economy’s growth in Q3 surpassed analysts’ estimates, boosted by recent steps undertaken by the government and a reduced reliance on massive infrastructure projects. Instead, China has focused more on stimulating consumer demand, with retail sales being 5.5% higher in September.

China GDP Grew 4.9% in Q3, Above the Expected 4.5%

China’s economy grew faster than expected in Q3, indicating that the government’s recent stimulus measures have made a noteworthy impact. According to the new economic data, China’s gross domestic product (GDP) saw an annual increase of 4.9% in the July-September quarter, exceeding the analysts’ expectations of 4.5%.

However, the growth was still notably slower than in Q2, which recorded an annual surge of 6.3%. The slowdown was due to waning global demand for Chinese exports and the worsening crisis in the nation’s property sector. 

Chinese authorities have made significant efforts to boost the economy in recent months, such as ramping up spending on building ports and other infrastructure, slashing interest rates, and lifting some of the restrictions on home-buying. 

Quarterly, China’s GDP expanded by 1.3% in Q3, up from the 0.8% registered in the April-to-June period. 

China’s Retail Sector Shows Impressive Strength

The official economic data demonstrated that the retail sector has been the primary driver of China’s GDP growth in the third quarter. In particular, retail sales saw a 5.5% jump in September as consumers increased their spending ahead of the Golden Week holiday in early October.

The growth surpassed analysts’ consensus estimates of 4.9% and was higher than the 4.6% increase reported in August. In the meantime, the country’s unemployment rate dropped to 5%, and household savings rates edged lower, suggesting that a tighter labor market is raising consumer confidence. 

But despite the strength in the retail sector and higher consumer spending, officials from the National Bureau of Statistics warned of “more complex and grave” global realities, cautioning that demand from businesses and individuals hasn’t recovered as much as expected after the Covid-19 pandemic. 

SPI Asset Management partner Stephen Innes said that even though the new economic data surpassed expectations, the world’s second-biggest economy is “not out of the woods by any means.”

“This growth suggests a modest improvement in the Chinese economy. However, there are ongoing calls for increased policy support to maintain consistent growth, as there are concerns about the sustainability of the recovery.”

– Innes wrote in a note.

China’s economy has been substantially affected by its embattled property market, responsible for about a third of its GDP. Louise Loo, an economist at Oxford Economics’ China, said that property indicators “remained very weak in September, with no signs of bottoming out.”

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