context: After being delayed for almost a week while the 20th Party Congress was being held, the data show a decent recovery after the slowness of the first half of the year, but weakness in demand remains. COVID-19 controls remain and will set a ceiling for economic recovery.

Data released by the National Bureau of Statistics on 24 October showed GDP grew by 3.9 percent y-o-y in Q3, 3.5 percentage points higher than in the second quarter. Macro indicators showed

  • national fixed asset investment increased by 5.9 percent y-o-y, 0.1 percentage points faster than from January to August
    • infrastructure investment increased by 8.6 percent y-o-y, up 0.3 percentage points from the previous eight months
  • September retail sales increased by 3.0 percent y-o-y, down from 5.4 percent in August

Most of the growth was driven by policy support, noted analysts. The increase in funding for infrastructure has boosted fixed asset investment, notes Wu Chaoming 伍超明 Chasing Research Institute deputy director. He predicts the growth rate of infrastructure investment in Q4 will reach 9-10 percent.

Consumer spending is a cause for concern. The economic slowdown has hurt incomes and uncertainty over future incomes and COVID outbreaks have slowed spending, notes Luo Zhiheng 罗志恒 Yuekai Securities chief economist. Wang Qing 王青 China Orient Golden Credit Rating chief macro analyst adds that the effect of the weak real estate market will weigh on consumers’ minds in the short term which will cause GDP growth to remain subdued in Q4: some 4.5 percent. While the government has moved to support the real estate market and demand may bottom out before the end of the year, investment will take longer to recover, he adds. However, Wu is slightly more optimistic, pointing towards the increase in policy support.