Following the release of China economic data for the first three quarters, with third-quarter performance surpassing market expectations, a number of international financial institutions have expressed optimism on China’s growth outlook for 2023, saying that positive factors are accumulating.
The UBS raised its forecast for China’s gross domestic product (GDP) growth in 2023 to 5.2 percent from 4.8 percent previously, while Deutsche Bank, Nomura and the J.P. Morgan have all lifted China’s full-year GDP growth forecast due to the growing body of optimistic data.
China’s GDP expanded 4.9 percent in the third quarter (Q3), up 1.3 percent over Q2. It grew 5.2 percent year on year in the first three quarters of 2023, according to the National Bureau of Statistics (NBS).
An array of other data released last month underscored the gathering steam of the world’s second-largest economy despite lingering global and domestic headwinds, consolidating the country’s confidence of meeting the annual GDP growth target of around 5 percent.
In September, industrial output rose 4.5 percent year on year. Growth was the same in August, and 0.8 percentage points faster than July.
Given the high base in the same period last year, the real industrial growth rate in September improved from August, said Xiong Yi, chief China economist at Deutsche Bank, adding that the industrial capacity utilization rate also sends positive signals.
Zhu Haibin, chief China economist at J.P. Morgan, noted that China’s new energy industry and infrastructure sector saw relatively good performance in the first three quarters.
“In the first three quarters of 2023, the output of solar cells soared by more than 60 percent year on year. The output of new energy vehicles also increased by over 30 percent, maintaining a relatively high growth rate,” he said.
China’s infrastructure investment growth picked up in September, due to the acceleration in issuance of local government special bonds, while the manufacturing investment also increased thanks to supportive policies and improving industrial profits, said Wang Tao, chief China economist and head of Asia Economic Research at UBS.
Consumption, a mainstay of the Chinese economy, has seen steady expansion, with an 83.2-percent contribution to GDP growth in the first three quarters of this year.
The country’s retail sales of consumer goods climbed 6.8 percent year on year during the period, with retail sales of services surging 18.9 percent year on year, playing a key role in boosting consumption, according to the NBS.
A travel boom during the recent Mid-Autumn Festival and National Day holiday period pointed to the continuous recovery of consumption, said Lu Ting, chief China economist at Nomura.
In the third quarter, the upward momentum of the country’s foreign trade has also become more apparent. China’s foreign trade volume reached 3.74 trillion yuan (about 520.92 billion U.S. dollars) in September, reaching a new monthly high this year and registering month-on-month growth for a second consecutive month.
Amid the sluggish global economic recovery, China’s exports have shown strong resilience, said Zhu. “On the one hand, diversification of export destinations has helped stabilize foreign trade. On the other hand, exports of automobiles rose rapidly, and electronic product exports also showed a rapid recovery trend,” he said.
Economists believe that, with fiscal and monetary policies becoming more proactive and effective, the positive momentum of China’s economic recovery will be consolidated in the fourth quarter of the year.
China only needs GDP growth of 4.4 percent year on year in Q4 to meet its annual growth target, and this should not be a huge challenge considering the low base in Q4 last year, said Lu.
Lu noted that China has a huge market, a well-educated population and a first-class internet network, and it has doubled down on efforts to develop high-end manufacturing.
“These have given us confidence in China’s economy,” he said.
Shayne Heffernan
