Markets
China's Economy Grew 4.5% in the Third Quarter, a Beat Built on Chip Exports While Property Investment Fell 20.6%
China's GDP rose 4.5% from a year earlier in the third quarter, above the 4.4% economists expected and up from 4.3% in the second, the National Bureau of Statistics said on October 19. Retail sales grew 1.1% in September, the fastest since March, but property investment is down 20.6% this year. Shanghai stocks rose 0.2%.
China's economy grew faster than expected in the three months to September, and the reason is the same one that has been moving every other market this month: demand for chips. Gross domestic product rose 4.5% from a year earlier, the National Bureau of Statistics said on Monday, October 19, against a Reuters poll forecast of 4.4% and a second-quarter reading of 4.3% that had been the weakest in more than three years. On a quarterly basis the economy grew 1.2%, up from 0.9% and ahead of the 1.1% expected. Output in the first nine months was 107.1 trillion yuan, 4.6% more than a year earlier, inside the government's target of 4.5% to 5% for the year.
The monthly data released alongside were better still. Retail sales rose 1.1% in September from a year earlier, more than twice the 0.5% forecast and up from 0.4% in August; it was the fastest growth since March, though still a weak number for an economy whose consumers once added 8% a year. Industrial output rose 5.5%, against 5.4% expected and 5.2% in August. The surveyed urban unemployment rate fell to 5.2% from 5.3%. Economists at several banks attributed the quarter to exports of semiconductors and electronic components feeding the global build-out of AI data centres, which held up even as the domestic economy did not.
The domestic weakness is in the investment figures. Fixed-asset investment fell 7.2% in the first nine months of the year, roughly in line with the 7.3% decline expected. Property investment fell 20.6%, and infrastructure investment, the lever Beijing has pulled in every previous slowdown, fell 4.2%. New home prices declined again in September, at a slightly slower pace. The pattern is an economy growing on what it sells abroad while what it builds at home shrinks for a fourth year.
Markets took the beat as a reason to expect less, not more, from policymakers. The Shanghai Composite was up 0.2% at 3,722 by midday, barely changed from Friday's 3,716.28, and the Hong Kong exchange was closed for the Chung Yeung Festival. Economists at Capital Economics and others said a quarter inside the target range reduced the case for a large stimulus package at the Politburo's October meeting. The Australian and New Zealand dollars, the usual proxies for Chinese demand, firmed; copper and iron ore were mixed, with factory strength offset by the property figures.
For the rest of the world the number matters in two ways. Chinese export strength in electronics is part of why South Korean and Taiwanese chipmakers sold off so hard last week: the same AI demand that lifted China's third quarter is the demand investors now fear has been over-ordered. And a government that sees 4.5% growth and inflation near zero has little reason to loosen, which keeps the yuan firm and Chinese bond yields low while US yields sit above 5%. The next read on the domestic side is the October purchasing managers' survey on October 31; the Politburo's economic meeting is expected late in the month.