Away from the main stage of China’s 20th party congress, a press conference on Monday addressed the sensitive question of economic growth.
“The economy rebounded significantly in the third quarter,” said Zhao Chenxin, a senior official at the National Development and Reform Commission (NDRC), just a day before new GDP data were due to be published. The country’s performance, he added, was “outstanding”.
But hours later, the government’s statistics department quietly updated its website to clarify that the data would be delayed, without providing further explanation or comment. Economists had forecast growth of just 3.3 per cent — far below the country’s long-term average and its 5.5 per cent target for the year.
Viewed in some quarters as an attempt to avoid distracting from China’s biggest political event in years, the delay nonetheless came at a time when growth has become an uncomfortable topic in Beijing.
The Chinese economy — underpinning the Communist party’s governance model for decades and recently on course to become the world’s biggest — is beset by a property crisis and strict zero-Covid controls that have damped consumer spending through frequent and intense lockdowns.
“That slightly above 3 per cent sub-par growth is probably the best they can get with strict Covid management and the drag from the housing sector,” said Robin Xing, chief China economist at Morgan Stanley.
“The only meaningful policy lever they have for next year is the change in Covid management, aimed towards reopening.”
But the government, both at the congress and in the build-up to the event, has reinforced its zero-Covid approach and declined to provide any timeline for reopening. A Goldman Sachs tracker of China’s Covid policies notes that cities with high and medium-risk districts now account for 40 per cent of national gross domestic product, which they said implied “continued pressure on consumption and services in October”.
Aidan Yao, senior emerging Asia economist at Axa Investment Managers, said the discussion on zero-Covid was “backward looking” and that the policy was likely to remain in place under the same name, even if there was scope for adjusting its implementation.
Other releases, including those for house prices in China’s 70 biggest cities, and customs data, due on Friday, have also been delayed.
Given the tightly controlled language of the congress, which typically focuses on China’s longer term and overarching ambitions, analysts are quick to spot omissions that signal a change in priorities. Research platform CreditSights said that President Xi Jinping’s opening remarks on Sunday did not cover market reforms, financial institutions and the data economy, which were stressed as important areas at previous congresses.
However, he did state the country would “better leverage the fundamental role of consumption in stimulating economic growth” and address “imbalanced development”. Xing at Morgan Stanley suggested the event so far had countered fears of a move away from economic development and towards security of energy, food and supply chains.
“I would say the concern before the party congress in the market was maybe China would be shifting policy agenda away from the economy,” he said. “But I think the party congress narrative here is allaying those concerns.”
Xi reiterated the need to build a “moderately prosperous” society by 2035, which entails a GDP per capita level equivalent to a median developed economy. Xing suggested this implied GDP per capita of $20,000-$24,000 a year, compared with slightly above $12,000 in 2021. That would imply a growth rate of about 4.5 per cent through to 2035.
This week’s unpublished GDP figures were set to be significantly below that and could set a path for growth at a weaker level than the 6 per cent or above maintained in the decades leading up to the pandemic.
Yao at Axa also pointed to the emphasis on economic development in Xi’s comments, including his “unwavering support” for the private economy, which Yao said would come “as a relief to many”. He suggested the tone signified the end of a series of regulatory and private-sector crackdowns in 2021 that included the education and tech sectors.
While GDP may pose a challenge to Chinese authorities, other metrics are more promising relative to other important economies. At Monday’s NDRC press conference, Chenxin pointed to China’s “moderate” increases in consumer prices, which contrast sharply with an environment of rising prices and rates elsewhere. Consumer price inflation was just 0.6 per cent in September.
Policymakers have pursued incremental easing measures over the past year, following restrictions on real estate leverage in 2020 that coincided with the emergence of what subsequently became a crisis for property developers. But weak price increases are also intertwined with China’s Covid restrictions and their depressive impact on spending.
For now, the lifting of strict Covid policies remains the main hope for a big uplift in growth — even if it is unlikely to materialise for several more quarterly GDP releases.