Industrial output undergirds recovery.
China’s economic growth continued to gain momentum in the third quarter, with the GDP expanding 4.9% from a year earlier in the July-September period, according to official Chinese data released on Monday.The pace of expansion was faster than the preceding quarter’s 3.2% and underlined the rebound in the world’s second-largest economy at a time when other major economies are struggling to recover from contractions triggered by the COVID-19 pandemic and the lockdowns to combat it. Growth was, however, slower than the 5.2% pace forecast by analysts in a Reuters poll.The IMF has forecast China’s economy will expand by 1.9% in 2020, making it the only major economy to register growth in a pandemic-hit year.The economic rebound follows China’s broad return to normalcy this summer, following sweeping COVID-19 curbs including stringent lockdowns, extensive contact tracing, and restrictions on international travel through the first half of the year, which allowed the authorities to almost entirely stop transmission of the virus within China, with the exception of a few clusters that were contained locally.Travel rebounds The country’s week-long October national holiday saw 630 million domestic trips and a surge in local tourism that generated $70 billion in revenue, with travel reported at 80% of last year’s numbers, according to Chinese financial magazine Caixin.The recovery was driven by a 5.8% growth in industrial production and a revival of exports. A surge in investments in infrastructure projects, enabled by measures to boost liquidity, had been sanctioned by the government, which had to grapple with millions of job losses at the start of the year as a result of the pandemic’s first outbreak in Wuhan in December. Consumption lags Consumption, however, is yet to regain its normal vigour with retail sales in the January-September period still down 7.2% from a year earlier, even though growth rebounded in September to 3.3%, from August’s 0.5% pace. “Whether you look at the most recent month, the quarter, or the year-to-date, it is obvious that the recovery in production vastly exceeds the recovery in consumption,” Michael Pettis, Finance Professor at Peking University in Beijing, said on Twitter, adding this would inflate an already ballooning debt burden. “While private-sector business investment, which is driven mostly by growth in consumption and exports, was down 1.5% year-to-date, total fixed asset investment was up 0.8% for the year,” Mr. Pettis said. “As a result, China’s debt-to-GDP ratio rose dramatically, from roughly 252 last September to roughly 275 last month,” he added.