Chinese Economic Data Exceeds Expectations Across the Board

Unexpectedly Positive Figures

On the same day that the Biden administration drew criticism for allegedly misrepresenting the final retail sales report before the election, China reported economic data that exceeded expectations across the board. This release of key economic metrics for the month included figures for Q3 GDP, retail sales for September, industrial output, fixed investment from January to September, and urban jobless rates. Each of these data points not only beat estimates but did so in a way that seemed calculated to appear realistic.

Boosting Confidence

The positive data is seen as a move by Beijing to instill confidence in the economy, following a recent attempt to stimulate the economy that appears to have fallen flat. The better-than-expected retail sales figures for September were reportedly boosted by government subsidies for home appliance purchases, which saw a 21% surge in sales from a year ago. However, investors are reportedly fleeing Chinese markets just days after mainland stocks soared as much as 30% on what now seems to have been hollow promises.

Challenges Remain

Despite the positive data, China's economy continues to face challenges. The Q3 GDP, while beating estimates, was the slowest since Q1 2023 and remains well below the government’s target for full-year growth of 5%. This is attributed to sluggish consumption and a property slump that has negatively impacted household sentiment. The National Bureau of Statistics has warned that the external environment is becoming increasingly complex and grim, and that the economy’s foundation for rebound and improvement needs to be further solidified.

Need for More Support

The softer growth underscores the need for more support for the economy from Beijing. In late September, Beijing announced its biggest monetary stimulus since the pandemic and followed up with promises of heavy fiscal spending, which have yet to materialize. China’s markets initially reacted positively to the news of monetary stimulus but have since slumped as investors await confirmation of the promised fiscal stimulus.

Market Reactions

Efforts by China's economic planner, finance ministry, and housing ministry to boost confidence have not met investor expectations. The Hang Seng Mainland Properties index fell 6.7% on Thursday after the housing ministry’s support for the real estate sector disappointed markets. However, the central bank has stepped in again with a slew of headlines to show that more easing and support for markets lie ahead.

Bottom Line

While China's recent economic data has exceeded expectations across the board, the country's economy continues to face challenges. The slower growth underscores the need for more support from Beijing, and investors are eagerly awaiting the materialization of promised fiscal stimuli. Despite the positive figures, it appears that there is still a long way to go before the Chinese economy fully recovers. What are your thoughts on this matter? Feel free to share this article with your friends and discuss it. And don't forget, you can sign up for the Daily Briefing, which is available every day at 6pm.