Overview

• China’s economy expanded by 4.6% yoy in Q3 2024 – broadly in line with our expectations – marginally slower than at 4.7% yoy growth recorded in Q2. We have argued for some time that the full year target of “around 5%” would be difficult to reach – indeed it would take a sizeable acceleration in activity in Q4, something we consider unlikely given the lack of meaningful fiscal stimulus to date. Should such a program occur following the National People’s Congress in late October, it likely implies more upside risk to our 2025 forecasts than 2024. Our growth forecasts are unchanged – we see an increase of 4.7% yoy in 2024, before easing to 4.6% in 2025, with the property sector and weak domestic demand remaining headwinds to growth
• Growth in China’s industrial production was slightly stronger in September – increasing by 5.4% yoy (compared with 4.5% yoy in August), following four months in a row of softer growth. There remain highly divergent trends across China’s industrial sector, with heavy industries associated with the construction sector continuing to contract.
• Stronger nominal growth and producer price deflation meant that real investment growth accelerated in September – up by 6.2% yoy in September, the strongest rate of increase since March 2024. There remain sizeable differences in investment by major industrial sectors, with manufacturing growing strongly, while real estate investment contracted for the 31st month in a row.
• Recent months have seen China’s twelve month rolling trade surplus trend higher – rising to US$890.0 billion (from US$883.7 billion in August), the third highest level on record. This largely reflects the growth in export volumes, which expanded by 15.7% yoy in August. In contrast, export prices fell by 6.3% yoy.
• Real retail sales increased by 2.8% yoy in September (up from 1.5% yoy previously). It is worth noting that this growth rate remains modest by historical standards – particularly those of the pre-COVID-19 pandemic period – highlighting the ongoing weakness in domestic demand.
• Credit issuance trends remained weak across the first three quarters of 2024. New issuance totalled RMB 25.7 trillion over this period, a decrease of 12.5% yoy. Bank lending declined by 21.7% yoy, while non-bank lending rose by 5.2% yoy – entirely driven by government bond issuance.
• In isolation, China’s monetary policy measures appear insufficient to stimulate significant growth in China’s economy, reflecting the headwinds of the property downturn – which we expect will continue for some time – and weak domestic demand.

For further details please see China’s economy at a glance (18 October 2024)