The world’s second-largest economy year-on rise in the July to September period is closer to pre-pandemic levels than Q2 growth.

Containers are seen at the Yangshan Deep-Water Port in Shanghai, China October 19, 2020.
Containers are seen at the Yangshan Deep-Water Port in Shanghai, China October 19, 2020. (Reuters)

China’s shaky economic recovery from the coronavirus pandemic is gaining strength as consumers return to shopping malls and auto dealerships while the United States and Europe endure painful contractions.

China's GDP grew 4.9 percent in the third quarter, data showed Monday, building on a strong recovery from painful coronavirus lockdowns.

However, the expansion fell short of forecasts and officials warned of uncertainty as the disease continues to ravage other key markets, with the National Bureau of Statistics saying "the international environment is still complicated".

Subdued reaction

China stocks reversed earlier gains to close lower on Monday, weighed down by industrial and healthcare firms, after the weaker-than-forecast GDP growth for the third quarter.

Some Asian markets rose on lingering hopes for a new US stimulus package.

Tokyo rose more than one percent, wiping out all its losses for the year, while Taipei also put on more than one percent and Manila jumped 2.1 percent.

Sydney and Mumbai climbed 0.9 percent each, while Seoul, Singapore and Jakarta were also well up. London, Paris and Frankfurt rose in early trade.

Hong Kong rose 0.6 percent but the gains were shallower than the morning after China's figures. Shanghai finished lower, along with Wellington.

Still on positive track

Having essentially shut down major cities around the country to fight the virus, China's economy saw an unprecedented contraction in the first three months of the year but with new infection rates being brought under control it has seen a strong recovery over the past six months.

That has put it on track to be the only major economy likely to expand this year, the International Monetary Fund said.

The 4.9 percent growth in July-September followed a 3.2 percent rate in the previous three months, and is close to pre-pandemic levels.

The reading was helped by a forecast-beating 3.3 percent jump in retail sales last month, suggesting China's army of consumers are return ing to shops and restaurants, and travelling again.

Industrial output also beat expectations, jumping 6.9 percent on-year in September.

China's communist leadership has hailed its handling of the virus, giving experimental vaccines to hundreds of thousands of people as it seeks to reframe the pandemic's origin story.

But long-term fears over jobs and a potential virus rebound in China are weighing on consumer sentiment, despite government attempts to reignite domestic demand.

READ MORE: China expands pool of people receiving experimental Covid-19 vaccines

Consumer caution 

"China built its quick recovery via stringent lockdowns, massive testing, population tracking and fiscal stimulus," Nomura chief China economist Lu Ting said.

Other factors such as export growth and a surge in demand after massive floods in the summer also boosted activity in September, he added.

But "China is not absolutely free from the risk of a second wave of Covid-19, pent-up demand will likely lose some steam... and rising US-China tensions could dent China's exports and manufacturing investment," Lu said.

OCBC Bank's head of Greater China research Tommy Xie told that retail figures showed a positive trend, suggesting "rising interest in big ticket items" with car sales a key driver of the spending rebound.

"But it will take some time for us to access how sustainable this domestic demand is," he cautioned, citing that tourism revenues from domestic trips were still down by about 30 percent on-year in the early-October Golden Week period.

"That will also be particularly important for the upcoming growth, given China is now promoting a... strategy where domestic demand becomes increasingly important," he said, referring to China's push to make consumers the key driver of economic growth.

National Bureau of Statistics spokeswoman Liu Aihua said Monday that although China's economy has continued its steady recovery, the global picture is murky "with considerable instabilities and uncertainties".

She highlighted "great pressure" in forestalling virus cases from abroad and preventing a virus resurgence at home.

In September, China's urban unemployment rate dipped further to 5.4 percent, although fixed-asset investment growth turned positive for the first time in 2020.

READ MORE: China joins initiative that seeks to fight vaccine nationalism

Source: TRTWorld and agencies