China’s economy grew more than expected over the summer, though the real estate market continued to weaken, as the government and the banks it controls poured money into infrastructure and new factories.
Data released on Wednesday showed that economic output increased from July through September compared with the prior three months. Industrial production of everything from chemicals to electric cars strengthened as the government built more roads, sewage lines and other public works and as state-owned banks poured financing into factory construction.
Over the past year and a half, China’s economy, the world’s second largest, has struggled. Housing sales have slowed, leaving some of the biggest developers staring down insolvency. The country’s debt load, which has surged in the past 15 years, continues to weigh on growth.
In the third quarter — from July through September — the gross domestic product grew 1.3 percent when compared with the three previous months, China’s National Bureau of Statistics said. For the second quarter, however, economic growth was revised down to 0.5 percent.
When projected out for the entire year, the third-quarter data indicates that China’s economy was growing at about 5.3 percent, compared with an annual rate of 2 percent in the second quarter.
Consumer spending faltered in the spring, but appears to have stabilized in recent months. Retail sales climbed 5.5 percent in September from the same month a year ago, an acceleration from a 4.6 percent pace in August.
“It seems tentative, but better than it was three months ago,” said Meg Rithmire, an associate professor at Harvard Business School who specializes in the Chinese economy.
China is turning to a familiar playbook to stimulate growth, essentially continuing the heavy public spending that it deployed during the pandemic. The issuance of local government debt was up 4.2 percent in the first eight months of this year over the same period last year, but increased 59 percent compared with the first eight months of 2019.
Sheng Laiyun, deputy commissioner of the National Bureau of Statistics, said at a news conference that China’s economic performance so far this year “has laid a strong foundation” for continued growth. But he also cautioned that “the external environment is becoming more complex and grave while the domestic demand remains insufficient and the foundation for economic recovery and growth needs to be further consolidated.”
Consumers, alarmed by the property crisis, have been wary of spending.
The real estate market remains at the heart of the economy’s deeper problems: A two-year decline in home prices has left families feeling less prosperous, and less willing to spend money as a result. Weak demand for goods and services has left the economy teetering at the edge of deflation. Consumer prices were unchanged in September from a year earlier, and wholesale prices charged by producers actually fell, according to government data released on Friday.
Falling prices for apartments have triggered a wave of insolvencies among real estate developers and depressed construction — previously one of the country’s largest industries. The statistics bureau said on Wednesday that investments in real estate development were down 9.1 percent in the first nine months of this year compared to the same period last year, even as investments in infrastructure and manufacturing capacity were each up 6.2 percent.
According to the Beike Research Institute in Tianjin, average prices for existing homes across 100 Chinese cities are now down 16 percent since August 2021.
The government has tried to offset the slowdown.
Officials in Beijing have given local governments a green light to issue more bonds to pay for infrastructure projects. The state-controlled banking system has been pumping out loans to manufacturers so they can invest in more factories.
The goal has been to create jobs, with the hope that people will then spend more money. Unemployment has been very high among young people this year, and the government stopped releasing the data in August. But overall urban unemployment fell in September to 5 percent, from 5.2 percent in August and 5.3 percent in July.
The lending is starting to help companies like Dalian Bingshan Group, a large manufacturer of commercial heating and cooling systems in the city of Dalian. “At Bingshan, we get a lot of government support — financing support, policy support,” said Ji Zhijian, the group’s chairman.
China’s top leader, Xi Jinping, has cracked down over the last several years on private-sector companies in fields ranging from internet platforms to home tutoring. But he has shown hints of softening in recent days as the economy continues to struggle, remarking on Friday, during a visit to Jiangxi Province, that he wanted to “promote the healthy development of the private economy.”
The pandemic casts a long shadow.
The main G.D.P. number reported by the government on Wednesday, which compared this summer with the same period last year, showed growth of 4.9 percent.
But a year ago, China’s economy was still struggling with “zero Covid” restrictions that included municipal lockdowns, mass quarantines and severe limits on travel between provinces.
“It’s not fair to compare the economy now to the economy a year ago, when many in China were stuck in their homes, and that comparison also tells you little about where the economy is headed now,” said Diana Choyleva, the chief economist at Enodo Economics, a London research firm that focuses on China.
China’s factories are still busy.
Even as China’s growth has slowed, its factories continue to produce a torrent of goods. And with domestic growth slowing, and consumers at home wary of making big purchases, China is finding big markets overseas.
China is flooding the world with exported cars, electric ones as well as gasoline-powered models.
Much of the merchandise is going to Europe. Before the pandemic, shipping statistics show, China exported 2.7 containers of goods to Europe for each container it imported. In recent months, China has been exporting almost four containers of goods for each container of imports.
But China’s export surge is generating political heat. European officials are concerned about the trade imbalance. And the European Union has already begun an anti-subsidy investigation into China’s fast-growing exports of electric cars, which could lead to tariffs next summer.
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