China's economy grew 4.8% in the third quarter from a year earlier, matching forecasts but underscoring deep imbalances as property investment plunged and consumer spending lost steam. The slowdown, coupled with a 0.5% contraction in fixed-asset investment, marks the country's weakest domestic momentum in a year and comes as President Xi Jinping convenes top officials to finalize China's next five-year economic plan.
Data released Monday by the National Bureau of Statistics showed that industrial production rose 6.5% in September-beating expectations-while retail sales grew 3% from a year earlier, matching forecasts but slowing from 3.4% in August. Economists said the figures highlight a widening divergence between China's export-led growth and its sluggish domestic economy.
"The bottom line here is that the growth is slowing down, but with huge divergence," said Ning Zhang, economist at UBS Group AG in Hong Kong. "The exports and industrial production beat expectation, but domestic economy like retail sales and investment is all slowing down."
Fixed-asset investment, which includes infrastructure, manufacturing, and real estate, fell 0.5% in the first nine months-its first contraction since the 2020 pandemic year. The drop in fixed-asset investment is "rare and alarming," said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, warning that fourth-quarter GDP growth "faces downward pressure."
The weakness was driven largely by real estate, which contracted 13.9% year-to-date through September, deepening from a 12.9% fall in the previous period. "Weakness in real estate investment may persist for a longer period than previously anticipated," said Bruce Pang, adjunct associate professor at CUHK Business School, who added that this may represent "a structural restructuring" that prevents investment from returning to earlier levels.
Private-sector confidence also remained subdued. Excluding property, fixed-asset investment rose 3% in the first three quarters, down from 4.2% through August, while private investment outside real estate increased just 2.1%, slowing from 3%. "The weakness in investment spending, especially by the private sector, reflects a lack of confidence in the economy's growth prospects as well as in government policies that could support growth," said Eswar Prasad, professor of economics at Cornell University.
Retail indicators signaled fading consumer resilience despite wage growth and state subsidies. Home appliance sales, which had surged 25.3% earlier this year under a government stimulus program, rose just 3.3% in September. "I don't think we could stimulate domestic demand without stabilizing the housing market first," said Dan Wang of Eurasia Group on CNBC's Squawk Box Asia.
Disposable income for urban residents rose 4.5% in the first nine months after adjusting for inflation, while rural incomes increased 6%, the statistics bureau said. The urban unemployment rate edged down to 5.2%, from 5.3% the previous month.
Despite domestic weakness, China's export sector continues to outperform, accounting for 6.2% of nominal GDP in the third quarter-only slightly below the record 6.4% in the second quarter, according to Bloomberg analysis. Exports have "papered over deeper vulnerabilities," economists said, masking sluggish household demand and the protracted real estate crisis.
