Despite the challenging economic environment, the Chinese economy surprised the market with an economic growth rate of 4.9% compared to an expected rate of 4.4% YoY during Q3 of 2023; however, the pace was still slower than that of the past quarter of 6.3% YoY.
The Chinese economy is plagued with several headwinds. One of which is the Chinese real estate industry which is hit by a wave of bond defaults among indebted developers, including the biggest private developers representing around 40% of the industry in the country such as Evergrande and Country Garden. The latest data showed property investment declined by 9.1% during the period from January to September of 2023. This resulted in a large number of unfinished residential buildings and a loss of confidence in the sector, which accounts for around 25% of the country's GDP.
In addition, debt as a percentage of GDP has nearly reached the same level as in the US, with China holding the largest share of non-financial corporate debt worldwide, at 28%. Local government debt amounted to 92T Yuan ($12.58T) accounting for 76% of the country's economic output in 2022 increasing from 62.2% in 2019. Therefore, the government ordered major banks in the country to adjust repayment plans for loans for the first time to curb local debt risks.
However, data has been optimistic; Matt Simpson, senior market analyst at City Index in Brisbane said "It seems that all of that stimulus is finally beginning to take effect, with a broad beat from growth, retail sales, industrial production, and unemployment,". Besides the GDP growth rate surprise, retail sales also was up by 5.5% YoY in September exceeding the market’s expectations of 5% YoY, the largest increase since May 2023. Industrial Production also made a surprise act increasing by 4.5% compared to a 4.3% increase during September. Moreover, September saw the lowest jobless rate since November 2021 at 5%. The optimism comes from a supportive government, and the data reveals signs of a speedy recovery from all the challenges that faced the global economy.
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