China’s economy picked up 3.9 percent in the third quarter, growing faster than expected. However, as foreign trade loses momentum, China continues to pursue a zero-Covid policy and unemployment rises, the picture is mixed.
The economic recovery in China remains on shaky ground. According to the Beijing Statistics Office, growth in the third quarter increased more than expected by 3.9 percent. After only 0.4 percent in the second quarter, the second largest economy showed clear signs of recovery. However, further economic and trade figures indicated a mixed picture of the situation. The data had been eagerly awaited because Beijing unexpectedly postponed their release last week. Authorities did not provide a reason for the move. However, observers assumed that the decision was related to the simultaneous party congress in Beijing, which ended on Saturday.
After the conclusion of the party congress, China’s head of state and party leader Xi Jinping asserted that the Chinese economy was “resilient”. “China cannot develop in isolation from the world.” Weak global demand has further slowed Chinese export growth. Exports in September, calculated in US dollars, increased by only 5.7 percent compared to the same period last year, as reported by Chinese customs. In the previous month, the export machinery had already lost momentum and only achieved growth of 7.1 percent. Imports also increased in September, as in the previous month, by only 0.3 percent. Exports developed only slightly better than experts had predicted, while imports were slightly worse.
Experts cited high inflation in many countries and rising interest rates, which weighed on the global economy, as reasons for the slowdown in growth in Chinese foreign trade. In China, the low domestic demand is slowing down the development of imports, it said. While Chinese industrial production rose sharply by 6.3 percent in September, retail sales growth was slower-than-expected, rising 2.5 percent. The official urban unemployment rate also increased for the first time in four months by 0.2 percentage points to 5.5 percent. The strict zero-Covid strategy with lockdowns and other restrictions in particular is slowing down the Chinese economy, which is also suffering from a severe real estate crisis, high levels of debt and weak domestic demand.
Chinese trade with Germany fell noticeably by 7.8 percent compared to the same period last year. German exports to China even fell by 9.9 percent. China also exported 5.6 percent less to Germany. On the other hand, while Chinese exports to the European Union increased by 5.6 percent, China’s imports from Europe fell by 8.4 percent. Chinese foreign trade with the USA also fell significantly by 10.1 percent. Chinese exports to the US fell 11.6 percent, while imports from the US fell 4.6 percent.
The government is expected to fall far short of the original growth target of around 5.5 percent for this year. The World Bank expects only 2.8 percent. That would be only the second time in four decades that China’s growth has been so low, following the first year of the 2020 pandemic.
