SHENZHEN – China’s growth slowed further in the third quarter of 2024, but narrowly exceeded market expectations, underscoring the challenges that policymakers face as they ramp up efforts to set a flagging economy back on track.

       The country’s gross domestic product (GDP) expanded by 4.6 per cent year on year between July and September, official data released on Oct 18 showed, edging down from 4.7 per cent in the second quarter of 2024, to reach its lowest level in six quarters.

       Still, it beat the 4.5 per cent forecast by economists in a Reuters poll, on the back of better-than-expected data in September, which recorded improvements in factory output, retail sales and fixed asset investments.

       Speaking to reporters in Beijing, national statistics bureau deputy commissioner Sheng Laiyun said there were signs that the world’s second-largest economy was “stabilising and picking up”, with “marginal improvements” across several indicators in September.

       But he also acknowledged that this was “still preliminary”, and that foundations for an economic upturn are “not yet solid”. More will be done to accelerate the implementation of policies to boost the economy, he said.

       Since late September, China’s policymakers have unleashed a sweeping drive to reverse the downward trajectory of the nation’s economy and attain a growth target of around 5 per cent in 2024.

       While the effects of the recent stimulus measures would not yet be visible in the economic figures for September, the data highlights the effects of earlier-introduced policies, and underlines challenges that officials have to contend with going forward.

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       Retail sales, a key measure of consumption, grew at a four-month high of 3.2 per cent from September 2023. This was helped by a consumer trade-in programme that subsidises purchases of selected products.

       Sales of home appliances, a focus of the programme, grew by 20.5 per cent year on year in September. Motor vehicle sales, which had been shrinking for the past six months, rebounded to expand 0.4 per cent year on year.

       But data also reflected weak consumer confidence, evidenced by a contraction in sales of discretionary items not covered under the programme, noted economists Larry Hu and Zhang Yuxiao from financial services group Macquarie.

       These include sales of jewellery and cosmetics, which dropped by 7.8 per cent and 4.5 per cent respectively, year on year.

       Industrial output in September expanded at a four-month high, surpassing forecasts to reach 5.4 per cent year on year.

       High-tech manufacturing performed well, but output in industries related to China’s beleaguered property sector – including steel and cement – continued to shrink, noted Mr Lynn Song, chief China economist at ING Bank.

       The property sector has continued to be a major drag on China’s growth despite earlier-introduced support measures.

       In year-on-year terms, new home prices fell at their fastest pace in September since May 2015, according to Reuters’ calculations.

       Out of 70 major cities surveyed by the statistics bureau, 66 saw new home prices fall from the previous month, while all recorded monthly price declines for second-hand homes.

       “China’s economy is not out of the woods and continues to struggle,” said OCBC’s managing director for investment strategy Vasu Menon.

       “But fourth-quarter data could show some improvement and possibly allow China to achieve its 5 per cent target for this year after the slew (of) stimulus measures announced recently,” he said.

       Currently, year-on-year growth from January to September stands at 4.8 per cent.

       China’s top leaders signalled the urgency of reversing an economic slump via an unusually-timed Politburo meeting on Sept 26, and ministries have been rolling out a raft of supportive measures since.

       The country’s largest monetary stimulus package since the Covid-19 pandemic is being implemented.

       On Oct 18, the central bank launched two earlier-announced funding schemes that will provide more liquidity – of an initial 800 billion yuan (S$147.7 billion) – to support the stock market.

       And while the overall size of a corresponding fiscal stimulus package has not been disclosed, a host of measures to alleviate local government debt and backstop the beleaguered property sector have been announced over the past two weeks.

       “A boost from fiscal stimulus should help narrowly meet the annual growth target this year and support activity in the coming quarters,” said Dr Huang Zichun, a China economist at research company Capital Economics.

       She and other market-watchers will be looking to an upcoming meeting of the standing committee of the National People’s Congress, China’s legislature, for an indication of the size of the fiscal stimulus. It is expected to convene in either October or November.

       But even with this stimulus, ING’s Mr Song said that it would be difficult for China to reach growth of exactly 5 per cent. He forecasts growth of 4.8 per cent for 2024, which he believes can be seen as achieving the target of “around 5 per cent”.

       The roll-out of fiscal policies would probably take some time, and even after the quantum is approved by the legislature, policymakers would still have to determine where and how the money is split and spent, he noted.

       “I would expect most of the impact to come starting in 2025, rather than this year,” he said.