Consumption and investment fuel growth amid challenges

The Chinese economy grew by 4.9 percent in Q3 from the same quarter in 2022, bringing the growth for the first three quarters of 2023 to 5.2 percent.

East Asia's growth forecast for 2023 has revised up to 4.7 percent on higher-than-expected third quarter growth in China. The forecast for 2024 is maintained at 4.2 percent.

The Q3's growth was primarily driven by household consumption and public investment. Weak demand for exports and the real estate crisis continued to weigh on growth. To offset softer external demand and a prolonged property downturn, policy support is expected to continue.

In October, the Chinese authorities announced to issue treasury bonds of 1 trillion yuan ($140.69 billion) in Q4 to finance local government disaster prevention and recovery spending. The bonds will be split into two tranches, with 500 billion yuan (equivalent to 0.4 percent of GDP) to be used this year and the rest in 2024. The bond issue will cause the budget deficit to increase to 3.8 percent of GDP from 3.0 percent, and shows the government's determination to stabilize the economy.

Consumption and private investment are still regaining their footing, and the property sector remains contractionary. Although the growth momentum in services continues, latest PMI readings point to relatively weak manufacturing demand. The growth forecast for 2023 is revised up to 5.2 percent; the forecast for 2024 is unchanged.

This is a report based on Asian Development Bank's Asian Economic Development Outlook released in December 2023.

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