China's Q4 GDP growth expected to rise

Supported by China's ultra-long special government bonds funding the "cash for clunkers" automobile trade-in program, improved new home sales, triggered a rebound in exports, and increased stock market activity, we have raised our Q4 GDP growth forecast from 4.4 percent to 4.9 percent year-on-year.

Additionally, reflecting the delayed effects of earlier stimulus measures and policy adjustments since Sept 24, we now project full-year GDP growth for 2024 at 4.8 percent, up from 4.7 percent.

However, this recovery may prove brief. Despite the September policy shift, Beijing has yet to implement concrete fiscal stimulus measures beyond the debt swap program. Moreover, risks loom, including potential 60 percent tariffs on Chinese goods proposed by the incoming administration in the United States.

We maintain our 2025 GDP growth forecast at 4.0 percent, anticipating sequential growth to dip again in the first quarter. This could prompt stronger fiscal measures after the National People's Congress in March 2025.

The "cash for clunkers" initiative and subsidies for home appliances have significantly lifted sales. Growth of retail sales jumped to 4.8 percent year-on-year in October from 3.2 percent in September, beating market expectations at 3.8 percent.

Given the program's sustained impact and favorable base effects in November and December, we expect retail sales growth in Q4 to rebound further from Q3.

In response to persistently weak consumption, the central government pledged a new round of large-scale equipment renewal and consumer goods trade-in programs. These measures, which gained traction in October, reflect Beijing's shift from investment-driven to consumption-driven stimulus. The trade-in program is poised to remain a key driver of consumption in the coming months.

New home sales turned positive in June 2023, and pent-up demand appears to have extended into November.

We forecast a strong rebound in Q4 new home sales compared to Q3. However, we remain cautious about the sector's outlook. While Beijing has introduced easing policies and pledged to stabilize the property market, progress on concrete fiscal measures has been slow.

Severe delays in container shipments from Shanghai and Ningbo Beilun ports in September, caused by Typhoon Bebinca, pushed significant export volumes into October. While this shift has minimal impact on total exports for the two months combined, it necessitates adjustments between Q3 and Q4 growth figures.

Additionally, with the next US administration proposing 60 percent tariff on Chinese goods, substantial front-loading of exports to the US is expected starting in December.

Considering stronger-than-expected October export data and anticipated front-loading, we have revised our Q4 export growth forecast from 6.0 percent to 8.5 percent year-on-year.

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