China posts better-than-expected data for Aug; economic recovery reaches ‘turning point’
Published: Sep 15, 2023 10:13 AM
Lujiazui Photo:VCG

Lujiazui Photo:VCG

China on Friday posted better-than-expected economic data in August, as the world’s second-largest economy continues to recover, after policymakers took a series of measures to tackle challenges and downward pressure.

The strong data showed that the Chinese economy may have passed the worst phase in the recovery process and reached a turning point, and offered further proof that the “China collapse” claim hyped by Western officials and media outlets is absurd, analysts said. 

Better-than-expected growth in industrial output and retail sales, among others, also presented fresh confidence that the Chinese economy could meet its annual growth target, analysts said. But supportive policies still need to be effectively implemented to shore up the economy, which faces a complex international situation and sluggish global demand, they noted.

China's value-added industrial output increased by 4.5 percent year-on-year in August, higher than a reading of 3.7 percent in July, and retail sales grew by 4.6 percent, accelerating from July’s 2.5-percent growth, according to data released by the National Bureau of Statistics (NBS) on Friday. The growth in retail sales, a main gauge of consumption, reversed a decline seen in the June-July period.

The data beat a Reuters poll of economists, which forecast a 3.9-percent growth for industrial output and a 3-percent growth for retail sales. They were also higher than forecasts made by Chinese financial news site Yicai, which forecast a 4.03-percent growth for industrial output and a 3.95-percent growth for retail sales.

The solid performance was backed up by strong consumption growth during the summer holidays, which boosted the services industry, including tourism and catering, to high growth and to near pre-pandemic levels. Brisk automobile sales in the month also helped.

“In August, major indicators improved marginally, the Chinese economy recovered, high-quality development steadily advanced, and positive factors accumulated,” Fu Linghui, an NBS spokesperson, told a press conference on Friday following the release of the economic data. 

“Despite a complex international situation, China’s economy has shown strong resilience and vast potential, the endogenous growth momentum of the Chinese economy gradually increased, and along with the implementation of a raft of supportive policies, the economy is expected to continue its recovering trend,” Fu said.

However, Fu noted that external factors, including sluggish global demand and rising unilateralism and protectionism, and internal factors such as insufficient domestic demand and operational difficulties faced by domestic enterprises are still weighing down on the recovery. “The foundation for economic recovery still needs to be consolidated,” he said. 

Zhou Maohua, an economist at Everbright Bank, told the Global Times on Friday that the economic indicators have exceeded expectations in an all-round manner in August, reflecting that the momentum has improved significantly.

Faster growth in industrial output and retail sales, surging investment in manufacturing, and narrowing decline of real estate investment brightened the data set published on Friday, Zhou said. 

“Domestic production and social life continued to return to normalcy in August, and macro-policy effects are showing, and the pace of domestic demand recovery has accelerated again after slowing down in recent months,” Zhou said. “Considering economic data and trends in July and August, GDP growth in the third quarter is expected to reach 5 percent or even higher.”

Consumption, investment and industrial output showed slow momentum in recent months, but the endogenous growth momentum is showing signs of a reversal in the month, Zhou said.

NBS data also showed that China’s surveyed urban unemployment rate dropped by 0.1 percentage point from July to 5.2 percent in August.

Li Changan, a professor at the Academy of China Open Economy Studies of the University of International Business, said that the data also showed once again that claims of “China entering recession” or “China facing deflation” are groundless.

The better-than-expected data came after China issued a barrage of supportive policies to stabilize the economy amid downward pressure. In late July, Chinese policymakers issued 20 measures to boost domestic consumption, including support for expanding real estate and auto sales. A total of 24 measures were also released in August to boost foreign investment. 

On Thursday, the People’s Bank of China, the central bank, announced that it would cut the reserve requirement ratio by 25 basis points effective Friday, injecting more than 500 billion yuan ($68.7 billion) in medium- and long-term liquidity into the economy.

Li said that continued efforts are needed to further stabilize expectation and improve business environment. 

Highlighting the lingering challenges, fixed-asset investment in the first eight months posted a growth of 3.2 percent, down from 3.4 percent in January-July period. The fixed asset investment reading was lower than projections from both polls by Reuters and Yicai.

“If various supportive policies could converge, and to further drive growth in the three economic drives – investment, exports and consumption, the Chinese economy could reach targeted growth of around 5 percent for the year,” Li said.

Global Times