Oct 19, 2020 11:43 AM

Update: China’s Economic Recovery Continued in Third Quarter, Though Slower Than Expected

China’s GDP grew 4.9% year-on-year in the third quarter, accelerating from 3.2% growth in the previous quarter, official data (link in Chinese) showed Monday, as the world’s second-largest economy continued to recover from the Covid-19 pandemic, albeit more slowly than expected.


China’s GDP grew 0.7% year-on-year in total over the first three quarters, back in positive territory after being dragged down by a 6.8% contraction in the first quarter at the height of China’s Covid-19 outbreak.

“China’s quick recovery was a product of its stringent lockdowns, massive testing, population tracking, a large economy that can afford to be somewhat insulated, and fiscal stimulus via credit expansion,” economists at Nomura International (Hong Kong) Ltd. wrote in a note.

However, third-quarter economic growth was slower than the median estimate of 5.4% growth (link in Chinese) in a Caixin survey of economists. The Nomura economists said that was partly because high volatility made forecasting difficult. Macquarie Capital Ltd. economists also said in a note that they were not concerned as forecasting is more like “guesswork” in the year of Covid-19.

Although the headline growth missed market expectations, major economic indicators for September including consumption, industrial output and fixed-asset investment generally performed in line with forecasts, if not better.


Retail sales rose 3.3% year-on-year in September, accelerating from a 0.5% rise in August, according to data (link in Chinese) from the National Bureau of Statistics (NBS). The reading was better than the median forecast of a 2.5% increase in the Caixin survey.

Retail sales have made it through the worst of the pandemic, and are on the road to recovery, Liu Aihua, an NBS spokesperson, told a Monday briefing (link in Chinese). Final consumption expenditure contributed 1.7 percentage points to third-quarter GDP growth, in contrast to dragging growth down by 2.3 percentage points the previous quarter, she added.

But consumption remained a weak point compared with investment and exports. “With policy normalization, the recovery ahead will largely depend on the consumption recovery,” the Macquarie economists said.

Value-added industrial output, which measures production by factories, mines and utilities, grew 6.9% year-on-year (link in Chinese) in September, accelerating from a 5.6% increase the previous month and exceeding the median forecast of a 5.9% rise in the Caixin survey.


Fixed-asset investment, a key driver of domestic demand that includes infrastructure spending, moved into positive territory for the first time this year after recording a 0.3% decline in the January-to-August period, rising 0.8% year-on-year (link in Chinese) in the first nine months. The rate was the same as the median forecast in the Caixin survey.

Infrastructure investment, which consists of spending on construction of roads and railways and is generally led by the government, rose 0.2% year-on-year in the first nine months, reversing a 0.3% drop over the first eight months.

Investment in real estate development remained strong, rising 5.6% year-on-year (link in Chinese) in the first nine months, accelerating from a 4.6% rise in the January-to-August period.

China’s labor market also improved as the surveyed urban unemployment rate eased to 5.4% in September from 5.6% the previous month, NBS data showed. Jobs created in urban areas reached 8.98 million in the first three quarters, roughly hitting the annual target of 9 million.

As for the fourth quarter, Liu said authorities are confident that China’s economy will remain on the current track, judging from various factors including production, demand and the market situation.

The International Monetary Fund has forecast China’s GDP to expand 1.9% in 2020 and projects the country to be the only major economy to grow this year. Chinese central bank Governor Yi Gang on Sunday said China’s economy will likely grow about 2% this year.

Contact reporter Guo Yingzhe ( and editors Yang Ge ( and Gavin Cross (

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