Officially, China’s economy stabilized in Q3, with headline GDP growth improving to 3.9% y/y, above market expectations. The improvement was consistent with rising policy bank-financed infrastructure spending and several high-frequency indicators showing that industrial output had rebounded after COVID restrictions had eased in mid-September. But the data releases were overshadowed by the unexpected delay for the 20th Party Congress, damaging Beijing’s credibility. Headline data can continue improving in the next few months as base effects continue to support growth, but slowing exports, rising local debt pressures, and ongoing weakness in household consumption and incomes remain significant threats to the economy in 2023.
