Growth momentum improved in September, China’s third-quarter GDP growth was stronger than expected

Real GDP grew 4.6% year-on-year in the third quarter, slightly stronger than expected (the market consensus is 4.4%). Although the third-quarter GDP growth rate improved to 3.6% on a quarter-on-quarter basis, roughly in line with expectations, the National Bureau of Statistics adjusted the historical data of the quarter-on-quarter growth rate, which pushed the third-quarter year-on-year growth rate to be stronger than expected.

Fixed asset investment and social retail sales growth both exceeded expectations in September, partly due to stronger growth in infrastructure investment and automobile sales. Seasonally adjusted real estate sales and new construction area continued to fall in the third quarter compared with the second quarter, but real estate sales showed some signs of stabilization in September.

Raised China’s GDP growth forecast for 2024 and 2025 to 4.8% and 4.5%

Given the stronger-than-expected year-on-year GDP growth in the third quarter, coupled with a series of policy support recently introduced by the government, we expect the fourth-quarter GDP growth rate to rise to 6.5% on a quarter-on-quarter basis (seasonally adjusted quarter-on-quarter annualized growth rate), but the year-on-year growth rate will remain at 4.6%. Therefore, we raise our forecast for real GDP growth in 2024 to 4.8% year-on-year, but we expect nominal GDP growth to remain weak at 4.1% year-on-year. Fiscal funding support may continue until early 2025, and credit growth is also expected to rebound.

We raise our forecast for real GDP growth in 2025 to 4.5% (previously 4.0%), and our forecast for nominal GDP growth to 4.8% year-on-year. Assuming other conditions remain unchanged, if the final scale of fiscal policy support, real estate and other easing policies are stronger than expected, this may bring some upside risks to our 2025 economic growth forecast. If the United States significantly increases tariffs on China, we believe that even if domestic policy support is further increased, GDP growth may slow to below 4%.