How is the Chinese economy performing in 2023?

On Wednesday, 18 October, China announced that its GDP grew 4.9% year-on-year in the third quarter of 2023, putting it on track to achieve its 5% growth target

The Q3 figure was above analysts’ expectations of 4.5% growth, but below the 6.3% growth seen in the second quarter. On a quarterly basis, China’s GDP grew 1.3%, accelerating from 0.5% in the second quarter.

Despite growth exceeding expectations, the National Bureau of Statistics (NBS) commented that the ‘outside environment’ is growing increasingly ‘complex’, that domestic demand remains insufficient, and that ‘growth needs to be further consolidated’.

Over the past week, the NBS also released more economic data for September and the first nine months of the year, including both good news and bad.

Retail sales — a gauge of consumption — grew 5.5% year-on-year, up from 4.6% in August, and above analysts’ expectations of a 4.9% rise. Tourism and consumption revenue from the National Day Holiday “Golden Week” in October may push this figure up in the fourth quarter results, but consumer confidence is still not rebounding as quickly as hoped, likely due to widespread concern about troubles in the property market.

As such, the consumer price index showed no change in prices, and the producer price index (PPI) fell 2.5% year-on-year — marking 12 straight months of decline. This indicates ongoing deflationary pressures and weak demand for goods and services in China’s economy.

Exports dropped 6.2%, easing from 8.8% in August and above analysts’ expectations. This improvement was due to low base effects and it being peak export season for Christmas products. Statistics show that in recent months, China has been exporting four containers of goods for each container it imports (for comparison, this figure was 2.7 prior to the pandemic).

Industrial output of everything from electric vehicles to chemicals grew 4.5%, the same as August, beating analyst predictions. The improvement has been driven by increased financing for factory construction and infrastructure projects. The government has also been pushing capital spending in areas such as high-tech manufacturing.

Analysts told Reuters that these data results show that China’s stimulus measures, though piecemeal, are broadly having an effect, and that fewer stimulus measures should be expected in the final quarter as China is on track to achieve its annual growth target.