China’s Economy Grows 4.6% in Q3 2024: Key Stats on 4.6% GDP Growth, 5.4% Industrial Output, and 10.1% Drop in Property Investment

China’s economy grew at its slowest pace since early 2023 in the third quarter, but consumption and industrial production in September were better than expected. However, the struggling property sector is likely to keep pressure on the government to introduce more measures to boost growth.

Data released on Friday showed that the economy grew by 4.6% year-on-year from July to September, slightly above the 4.5% forecast by a Reuters poll, but down from the 4.7% growth in the second quarter.

Key Points:

The GDP grew by 4.6% in the third quarter compared to a year earlier (forecast was 4.5%, previous quarter was 4.7%).

Quarter-on-quarter, GDP grew by 0.9%, just below the forecast of 1.0% (Q2 growth was revised to 0.5%).

September’s industrial output rose 5.4% year-on-year (forecast was 4.5%, August was 4.5%).

September retail sales grew by 3.2% (forecast was 2.5%, August was 2.1%).

Fixed asset investment from January to September increased by 3.4% (forecast was 3.3%, same as the Jan-Aug figure).

Property investment from January to September dropped by 10.1% year-on-year (similar to the 10.2% decline in Jan-Aug).

Property investment in China fell by 10.1% in the first nine months of 2024 compared to the previous year, following a 10.2% decline in January-August, according to data from the National Bureau of Statistics.

Property sales by floor area fell by 17.1% year-on-year from January to September, improving slightly from the 18.0% drop in January-August. New construction starts, measured by floor area, declined by 22.2% over the year, a slight improvement from the 22.5% drop in the first eight months. Funds raised by property developers fell by 20.0%, a small improvement from the 20.2% fall in January-August.

China’s industrial production grew by 5.4% in September compared to the previous year, up from a 4.5% increase in August. This offers some hope to policymakers trying to stimulate the economy as the end of the year approaches.

Retail sales, which measure consumer spending, grew by 3.2% in September, accelerating from the 2.1% growth seen in August. Analysts had expected a 2.5% increase.

Statements from Chinese Officials:

The deputy head of China’s statistics bureau said that September’s economic indicators showed positive changes.

China’s foreign trade performance this year has been better than expected, but the economic recovery remains fragile.

The government will speed up the implementation of various policy measures to support the economy.

There will be re-loans provided to support stock repurchases and increased holdings.

A new facility to help securities, fund, and insurance companies has been launched to support the market.

Statements from the People’s Bank of China (PBOC):

China’s central bank governor, Pan Gongsheng, issued a warning on Friday about illegal fund flows into the stock market, as reported by state media. This comes after recent steps were taken to support domestic markets.

In September, the People’s Bank of China (PBOC) introduced two new tools aimed at boosting the market. One is a swap program designed to make it easier for funds, insurers, and brokers to access financing for stock purchases. The other provides relatively low-cost PBOC loans to help banks finance stock buybacks and share purchases by listed companies.

Speaking at a financial forum in Beijing, Pan Gongsheng emphasized that these measures are driven by market-based principles, clarifying that the swap facility does not represent direct financial support from the central bank. The PBOC’s provisions for stock buybacks and purchases have clear goals, with the key rule being that loan funds must not illegally flow into the stock market, he added.

The central bank is offering clear guidelines for stock buybacks and re-loans aimed at increasing holdings. Strict regulations will be enforced to prevent credit funds from being unlawfully used in the stock market.

A new swap facility for securities, fund, and insurance companies has been launched, with 20 companies already approved to participate. Initial application quotas have exceeded 200 billion yuan.

By the end of the year, the reserve requirement ratio (RRR) may be reduced further, depending on the liquidity situation in the market. This adjustment could range between 0.25 to 0.5 percentage points.

Macroeconomic policy should move from being primarily investment-focused to striking a balance between investment and consumption. This shift is essential for achieving a dynamic and stable economic balance.

The monetary policy framework will continue to be refined, with an emphasis on ensuring a reasonable rise in prices as a key goal.

The interest rate for the 7-day reverse repo operation in the open market will be lowered by 0.2 percentage points to support liquidity.

Depending on the liquidity conditions, the interest rate for the medium-term lending facility could be cut by 0.3 percentage points.

Additionally, the Loan Prime Rate (LPR) is expected to decrease by 0.2 to 0.25 percentage points, providing further support to the economy.

China’s debt has reached 366% of its GDP in the first quarter of 2024, which is more than double what it was in 2008. This debt is spread across different sectors: financial firms hold 45%, the government has 86%, non-financial companies have a large share of 171%, and households contribute 64%. Despite this huge debt, China is struggling to achieve its goal of 5% GDP growth.

Update

U.S. shares of Chinese companies are rising in premarket trading after the central bank announced measures to support the domestic market. Alibaba ($BABA) is up 3.4%, Bilibili ($BILI) has jumped 7.5%, Tencent Music ($TME) is up 4.5%, PDD Holdings ($PDD) has increased 5.4%, NetEase ($NTES) is up 5.3%, and Baidu ($BIDU) has risen 4%.

Update (October 21, 2024)

Chinese banks have reduced their lending rates to help boost their struggling economy. The size of the cuts was larger than expected but still within the forecast range of the People’s Bank of China. After lowering interest rates in late September, this move is part of broader efforts to stimulate economic growth and stop the decline in the housing market.

The one-year loan prime rate was cut from 3.35% to 3.10%, and the five-year loan prime rate was lowered from 3.85% to 3.60%. Markets are now expecting further steps to ease monetary policy following these rate cuts.

In the third quarter of 2024, China’s economy suffered major losses due to natural disasters like super typhoons and floods. From July to September, the direct economic losses reached 230 billion yuan ($32.3 billion), more than double the 93.16 billion yuan lost in the first half of the year. These disasters have disrupted food supplies, raised prices, and hurt agricultural production.

In total, China lost 323.2 billion yuan in the first nine months of 2024, a higher figure than the same period last year. Despite the country’s efforts to adapt to changing weather patterns, these disasters show that China is still struggling to protect its economy from the increasing damage caused by extreme weather.

More than 84 million people were affected by these disasters, with 836 people reported dead or missing, and 3.35 million needing urgent help. The ministry reported that 50,000 homes were destroyed, 630,000 were damaged, and 9.05 million hectares of crops were impacted.

Update 23rd October, 2024

A Chinese policy think tank has proposed that Beijing issue 2 trillion yuan ($280 billion) in special treasury bonds to create a stock market stabilization fund, as reported by the 21st Century Business Herald. This fund would aim to stabilize the market by buying and selling blue-chip stocks and ETFs. The proposal comes from the Institute of Finance & Banking, part of the Chinese Academy of Social Sciences, but its potential impact on policy remains uncertain. Additionally, last Friday, China’s central bank launched funding schemes to inject up to 800 billion yuan into the stock market, providing liquidity to brokerages and allowing companies to borrow cheaply for share buybacks.

Update (25th October, 2024)

Defaults in a hidden part of China’s local debt market have hit a record high, trapping investors who believed the securities had implicit state backing. In response to rising bad debt from municipal financing arms, the central government last year allowed local authorities to issue 2.2 trillion yuan ($309 billion) in new bonds to help repay creditors and ordered state banks to offer refinancing support. Despite this, failures of non-standard products, valued around $800 billion, have surged to record levels.

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