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1、Chinas economy on track inthe first three quarters,incremental policies tointensify counter-cyclicaladjustmentsNovember 2024Facing complex and volatile domestic and internationalenvironments,China has maintained stable economicexpansion in the first three quarters,with the grossdomestic product(GDP)

2、growing 4.8%year-on-year(YOY)1.Although Q3 GDP grew 4.6%YOY,the slowestgrowth rate since Q1 2023,some macro indicatorsimproved slightly in September,implicating thedemand-supply gap will possibly recover gradually inthe coming months.The technology and innovation advantage continued toenhance,with t

3、he production and investment of high-tech manufacturing leading the average level.Consumption spending showed a moderate recoverythanks to the intensified efforts on trade-in ofconsumer goods measures,which will spur the demandof automobiles,household appliances and home decorscontinuously.The count

4、rys foreign trade hit recordhigh in the first three quarters,driven by the exports ofhigh-end equipment.To conquer the unbalanced and inadequate growth,thegovernment made economic stability as top priority andintroduced a package of incremental policies recently,including lowering reserve requiremen

5、t ratio(RRR)andinterest rate,reducing the interest rates on existingmortgages and unifying the minimum down paymentratio.Resolving local government debts will be one offiscal priorities and it will mitigate short-term liquidityrisks,optimize the government debt structure andboost market sentiment.Ch

6、inas economy will possibly gain renewed momentumin Q4,with upward trajectory in infrastructure andmanufacturing investment and consumption recoverypromoted by vouchers in various cities.Weakeningexternal demand will put more pressure on theindustrial production and exports.The property marketis expe

7、cted to see marginal improvement,withinvestment decline narrowed further,however it willstill in a precarious position,considering the residentsaffordability and willingness of purchasing and incomeissues etc.31.National Bureau of Statistics(NBS),https:/ economy maintained a steady performance in th

8、e first three quarters,with GDP growing by 4.8%YOYto RMB94.97 trillion.The upward momentum remains unchanged in long-term as GDP fluctuations in Q2 and Q3still within reach of the annual growth target.2.Referring to the implementation of major national strategies and security capacity built up in ke

9、y areas as well as the policies on large-scaleequipment renewal and trade-in of consumer goods.3.NBS,https:/ economy sustains moderate yet divergent recovery.Stabilizing growth ishigh on the agenda.4Figure 1.The support of net exports to economic growth strengthened in Q3Source:NBS3.403.043.46-0.812

10、.370.373.025.374.634.163.912.191.350.730.080.530.250.703.781.761.971.241.200.631.881.281.071.190.810.950.83-1.26-0.28-1.05-0.97-0.160.770.631.97(2)(1)0123456782021-09 2021-12 2022-032022-06 2022-09 2022-12 2023-03 2023-062023-09 2023-12 2024-03 2024-06 2024-09Three drivers of GDP growthConsumptionIn

11、vestmentNet exports（%）The output of high-tech and equipmentmanufacturing was stable,however,the demandof overall industrial production was still weak.Multiple industrial segments saw upside growth inthe first three quarters,driven by theimplementation of major national strategies andsecurity capacit

12、y built up in key areas as well asstimulate on large-scale equipment renewal andtrade-in of consumer goods2.In particular,the high-tech and equipment manufacturing sectors grew by9.1%and 7.5%YOY respectively,up 3.3 and 1.7percentage points from the overall growth ofindustrial enterprises above the d

13、esignated size3.The production of new energy vehicles and chargingpiles surged by 33.8%and 57.2%YOY respectively,thanks to the trade-in of consumer goods andrenewal subsidy4.The capacity utilization rate of industrial enterprisesabove the designated size rose slightly to 75.1%inQ3,higher than 74.9%f

14、rom the previous quarter5.Sector-wise,the manufacturing of electricalmachinery and equipment has seen an uptick for twoconsecutive quarters and supply and demandstructure in new energy is showing signs ofimprovement.Weakening external demand will putmore pressure on the industrial production in thec

15、oming months,the government needs to furthersupport the improvement in domestic demand-related sectors through policy adjustments,whileaccelerating the transformation and upgrade oftraditional industries and addressing structuralissues amid reform.6.NBS,https:/ 2.The growth rate of industrial output

16、 bottomed out in September after four consecutive months of declineSource:NBS(20)(10)0102030402021-052021-062021-072021-082021-092021-102021-112021-122022-012022-022022-032022-042022-052022-062022-072022-082022-092022-102022-112022-122023-012023-022023-032023-042023-052023-062023-072023-082023-09202

17、3-102023-112023-122024-012024-022024-032024-042024-052024-062024-072024-082024-09Industrial output overall and key segments-cumulative YOY growth rate(%)Overall industrial outputManufacturingAutomotive manufacturingElectrical machinery and euqipment manufacturingComputer,communications and other ele

18、ctronic equipment manufacturingThe purchasing managers index(PMI)has pickedup and will possibly stay in the expansion range inthe next few months.The supply and demandindicators both showed improvement in September,with the manufacturing PMI standing at 49.8%,up0.7 percentage points from the previou

19、s month,andthe new orders index picking up after fiveconsecutive months of decline6.Sector-wise,thehigh-tech and equipment manufacturing continued totake a leading role while high energy consumptionsectors remained in the contraction range.Stimulating by the new incremental policies,Chinaseconomy is

20、 expected to see a moderate recovery inQ4,PMI will possibly stay above the boom-or-bustline and the business activities recovery will bemore balanced among enterprises of all sizes.However,the ongoing adjustment of the real estatesector and the uncertain impact of exports still needclose attention.3

21、03540455055606570PMI*(%)ManufacturingHigh-tech manufacturingEquipment manufacturingServicesConstructionNew orders in manufacturingFigure 3.Domestic demand recovery underpinned the recent PMI pick-up and small and medium-sized enterprisesstill need greater policy supportSource:NBS*50%=Being unchanged

22、 compared to the previous monthChinas fixed asset investment(FAI)bottomed outwith divergence in sub-segments.The FAI rose by3.4%YOY from January to September after fewmonths of decline7.Sector-wise,infrastructureinvestment posted a solid growth and high-tech andservices sectors investment surged nea

23、rly 10%,serving as key drivers of the economic structuraloptimization.The downward pressure continued inthe real estate development.In Q4,the investment in infrastructure andmanufacturing is expected to be sped up as thegovernment will take the lead in optimizing thetechnology infrastructure investm

24、ent,includingnew-generation information technology and newenergy technology,which will bring a strong boostto economic growth in the near term.The decline inreal estate investment is expected to be narrowedyet the slump momentum will persist in short-term.Figure 4.Investment in manufacturing sector

25、rallied for the first time over the last six monthsSource:NBS7.NBS,https:/ overall and key segments-cumulative YOY growth rate(%)Overall FAIHigh-techOverall manufacturingRailway,waterway and aerospace manufacturingAutomotive manufacturingElectrical machinery and equipment manufacturingReal estateInf

26、rastructureIn the first three quarters,consumption spendingshowed a moderate recovery,with total retail salesof consumer goods increasing by 3.3%YOY.InSeptember alone,the total retail sales of consumergoods grew by 3.2%YOY and the householdappliances,audio and video devices as well ascommunication e

27、quipment segments posted thefastest growth,up 20.5%and 12.3%YOYrespectively8.The struggling real estate marketcontinued to put pressure on related upstream anddownstream sectors including construction anddecoration materials.In Q4,consumption will be the key driver of theeconomy with vouchers in var

28、ious cities to boostdemand from catering and accommodation to digitalappliances and home decoration.The ultra-longspecial treasury bonds worth RMB150 billion tosupport the trade-in of consumer goods were issuedto local governments in early August andconsumption demands are expected to be furtherunle

29、ashed,especially for automotive and householdappliances in the next few months.7Figure 5.The foundation for consumption recovery still needs to be consolidatedSource:NBSThe total value of import and export of goodsreached a record high,with significant marketdiversification.In the first three quarte

30、rs,Chinasforeign trade amounted to RMB32.33 trillion,up5.3%YOY and exceeding the RMB32 trillion for thefirst time over the same period in history.Tradewith the Belt and Road countries hit RMB15.21trillion,up 6.3%YOY,much higher than the growthrate with the EU(0.9%)and the US(4.2%)9.ASEAN,Latin Ameri

31、ca and other emerging markets arebecoming the new bright spots for Chinas importand export growth.From product perspective,thehigh-end equipment export has surged over 40%amid the significant deceleration of traditionallabor-intensive goods export.Export of automobiles,integrated circuits andhouseho

32、ld appliances grew by 22.5%,22%and15.5%YOY,respectively,being the main driver oftrade expansion.Private enterprises experienced9.4%YOY growth in imports and exports,accounting for 93.8%of the countrys total tradevolume.Overall,the global economic recoveryremains a difficult and tortuous one and the

33、slowinggrowth of export in September may persist for acertain period.The overall disruption of EUsprovisional countervailing duties on Chinese EVsremains manageable,however,the subsequentimpact needs continuous attention.(20)(10)0102030405060702021-052021-062021-072021-082021-092021-102021-112021-12

34、2022-022022-032022-042022-052022-062022-072022-082022-092022-102022-112022-122023-022023-032023-042023-052023-062023-072023-082023-092023-102023-112023-122024-022024-032024-042024-052024-062024-072024-082024-09Total retail sales of consumer goods-cumulative YOY growth rate(%)Total retail sales of co

35、nsumer goodsOnline retail sales of physical goodsCatering revenueFigure 6.Chinas current macro policies are centered on boosting consumption confidence and expectations051015Per capita disposal income of urban residents-cumulative YOY growth rate(%)Source:NBS9.General Administration of Customs,http:

36、/ 7.Foreign trade continued steady growth momentum(20)(10)010203040502021-032021-042021-052021-062021-072021-082021-092021-102021-112021-122022-012022-022022-032022-042022-052022-062022-072022-082022-092022-102022-112022-122023-012023-022023-032023-042023-052023-062023-072023-082023-092023-102023-11

37、2023-122024-012024-022024-032024-042024-052024-062024-072024-082024-09Foreign trade-cumulative YOY growth rate(%)ExportImportSource:NBSForeign investment optimized in China,withgrowing localization and diversification.FromJanuary to September,Chinas inbound foreign directinvestment(FDI)amounted to R

38、MB640.6 billion,down 30.4%YOY.The investment of high-techmanufacturing industry maintained steady growthamid economic growth drivers transformation,amounting to RMB77.1 billion in the first threequarters,an increase of 1.5 percentage points overthe same period last year.During the same period,the co

39、untrys newly established foreign-investedenterprises saw a 11.4%YOY growth,with continuedinvestment in the supply chain fields.As of earlySeptember,a dozen of foreign automotive companiespoured investment in new projects,particular in newenergy vehicles and new materials.More local research and deve

40、lopment investmentshows that compared with short-term profits,foreign companies are accelerating innovation andintelligent transformation to lay out their long-termdevelopment in China.In this new era,bothopportunities and challenges exist in attracting andutilizing foreign investment.The recent rem

41、ovementof restrictive measures on foreign access to themanufacturing sector and the piloting ofbiomedicine,wholly foreign-owned hospitals andvalue-added telecom services reflect Chinasdetermination to further opening-up.The expansionof foreign access to the telecommunications,internet,education,cult

42、ure and health care sectorswill be a key focus next step.Figure 8.China is still attractive in the high-tech and advanced manufacturing sectors amid continuous FDIfluctuations(40)(30)(20)(10)0102030050100150200200820092010201120122013201420152016201720182019202020212022202320241-9Inbound FDI-cumulat

43、ive total YOY（US$，billion）（Cumulative total YOY,%）Source:Ministry of Commerce9Incremental policies to spur the economic recoveryChinas economy is currently under the dualpressure of a short-term insufficient demand and amedium-to long-term structural optimization andtransformation.To stabilize and p

44、romote economicgrowth,the government will intensify the counter-cyclical adjustments through a slew of incrementalmeasures.From monetary perspective,the centralbank has recently lowered the RRR and interestrate,more easing measures are expected in thecoming months10.From fiscal perspective,resolving

45、 local government debts will be toppriority.On 8 November,the government unveiledthe biggest debt swap program11in recent years,RMB10 trillion(US$1.4 trillion)to ease localgovernment financing strains.Under variouscoordinated plans,the total amount of existing(off-balance-sheet)debts that local gove

46、rnments needto deal with by 2028 will drop from RMB14.3trillion to RMB2.3 trillion12.This will help localgovernments to unclog money pipes to the realeconomy and enhance consumption andinvestment.In addition,more fiscal stimulus isexpected in 2025 to boost domestic demand,including raising the budge

47、t deficit and expandingissuances of special-purpose bonds and ultra-longspecial treasury bonds.The whitelist mechanism has provided sufficientfinancing support to stabilize the real estate market.By end of October,commercial banks haveapproved loans amounting to RMB3 trillion for realestate projects

48、 on the whitelist13.This marks agrowth in real estate development loans comparedto the beginning of the year,reversing the previoustrend of continuous decline over the past few years.To further ease the financial burdens faced by realestate enterprises,the central bank isimplementing various measure

49、s,including reducingthe interest rates on existing mortgages,adjustingthe minimum down payment ratio for second-homebuyers and extending the expiration date of the“Financial 16 measures”and operating propertyloans policy until the end of 202614.The issuanceof special-purpose bonds will accelerate in

50、 thefollowing months,enabling local governments topurchase completed commercial housing foraffordable housing.The land market in tier 1 andsome tier 2 cities will see marginal improvement,with potential demand spurred by the tax policiesadjustments and optimizations(i.e.deed tax,value-added tax and

51、individual income tax).Increasing income of low and middle-income groupsand optimizing consumption structure are key toboost domestic demand in future.Stimulating by thevouchers in various local cities,consumption isexpected to be improved in Q4.However,to achievea substantial enhancement of the con

52、sumptionstructure in the medium-to long-term,it is essentialto establish a sustained endogenous mechanismthat stabilizes employment and increases income.Recently,the government authorities have alreadyintensified support and protective measures formajor groups and will continue to refine financial a

53、idpolicies for college students.With theimplementation of the policy on large-scaleequipment renewal and trade-in of consumer goods,more employment opportunities will emerge insectors such as the new-generation informationtechnology,energy conservation and environmentalprotection,biotechnology,new m

54、aterials and newenergy.Furthermore,advancements in science andtechnology and growing diversified consumerdemand will continue to drive new business forms indigital and green consumption and boostemployment opportunities in social services such aseducation,health care,elderly care and childcare.Expor

55、t in Q4 will possibly be impacted by theweakening global manufacturing demand and risingrisks of tariff frictions.Though the rising impact ofglobal commodity prices is possibly to become morepronounced,insufficient domestic demand will stillbe the key challenge to Chinas import,whichrequires more st

56、imulus from the incremental fiscalpolicies.A short-term export surge is possible asfactories may act to beat the clock on new andexpanding US tariffs,while the long-term trademomentum is expected to be resilient,backed bythe high-tech products,diversified market networksand cross-border e-commerce.1

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