Economists shrug off skeptics, focus on recovery, consumption, output

Economists on Wednesday sought to downplay talk among certain sections that China's economy may be in for some rough weather in the coming months, saying recovery continued in October, while consumption and industrial production improved, with more of the same expected down the line — a testament to the economy's resilience and vitality.

Experts, however, hastened to caution that the economy still faces pressure from still-weak domestic demand, souring private investment, ongoing stress in the property sector and mounting uncertainties.

More stimulus can consolidate the foundation for recovery, they said. Looking ahead, they said the economy will likely sustain its stable growth momentum with existing supportive measures taking effect gradually and more countercyclical adjustment measures in the offing.

"The economy had maintained recovery momentum in the first 10 months of the year, laying a solid foundation for meeting the objectives of full-year economic and social development," said Liu Aihua, spokeswoman of the National Bureau of Statistics.

She told a news conference in Beijing on Wednesday the economy will likely continue to recover in the following months with the macro policies taking effect gradually, underpinned by the anticipated improvement in demand and production as well as the steady development in industrial transformation and upgrading.

Figures released by the National Bureau of Statistics showed China's retail sales, a gauge of consumption, grew by 7.6 percent from a year earlier in October, up from the 5.5 percent growth in September.

"Retail sales in October were particularly strong, beating even our above-consensus estimates, given sharp increases in holiday-related spending components, including catering, tobacco and alcohol, sports and entertainment, and communication equipment," said Louise Loo, lead economist at British think tank Oxford Economics.

She believes momentum may persist going into the first quarter of next year, given seasonal spending patterns and positive base effects for annual comparisons.

China's value-added industrial output also grew at a faster 4.6 percent in October, accelerating from the 4.5 percent pace seen in September, according to the NBS.

Loo said fading destocking pressures likely contributed to an uptick in manufacturing activity, and notably three "new economy" sectors of electric vehicles, batteries and renewables raced ahead, all growing at double-digit year-on-year paces.

Despite the improvement in some key indicators, she said the drag from the property sector intensified in October, estimating that the weakness in housing sales, starts and investments may remain through 2024, given the property correction process.

Loo highlighted the necessity of further stimulus to consolidate the recovery trend, saying that a feed-through of these supportive measures will help stabilize growth momentum henceforth.

In the January-October period, fixed-asset investment grew by 2.9 percent compared with a year earlier, while, in the January-September period, it increased by 3.1 percent year-on-year. Real estate investment contracted further by 9.3 percent year-on-year, pulling down total private investments by 0.5 percent, NBS data showed.

Zhou Maohua, an analyst at China Everbright Bank, said while it may still take some time for the property sector to recover, the fixed-asset investment will likely pick up gradually, especially as the approval of a fresh 1 trillion yuan ($139 billion) in central government bonds suggests future acceleration in the implementation of key projects.

He warned of pressure from still-weak domestic demand, souring real estate, the private sector and uncertainties in the external environment, saying the macro policies should be kept consistent to promote the steady recovery of demand and stabilize prices.

Considering that the foundation for recovery is not yet solid, the country should further step up countercyclical adjustments to stabilize overall growth, Wen Bin, chief economist at China Minsheng Bank, said.

Referring to the recent Central Financial Work Conference, Wen said the policy stance would stay accommodative, with a focus on creating a favorable monetary and financial environment, expanding central government borrowing while resolving local debt problems, and stabilizing the property market.