Q3 GDP data and the associated monthly series were delayed due to the 20th Party Congress. When released they comfortably beat our and market consenus expectations, showing a very strong sequential rebound (+3.9% q/q).
- This release is notable in exceeding the broad distribution of key monthly indicators. One would need to believe that the tertiary sector as a whole defied lacklustre consumer confidence to fully discount the weakness across the spectrum of indicators.
- Our China Activity Indicator points to a more modest recovery in Q3, while month-on-month momentum eased in September. Moreover, PMIs for October imply activity faded further as Covid-restrictions have risen, suggesting growth in Q4 could be soft.
Even if infrastructure ramps up further there is no plausible quarter-on-quarter growth rate which can rescue 2022’s annual growth target (~5.5%).
President Xi's keynote speech at the 20th Party Congress signalled policy continuity, with existing trends towards a greater focus on security and domestic resilience reinforced.
- Xi's consolidation of power across the Politburo - combined with the opaque nature of China's political apparatus - amplifies the potential for sudden policy changes and periods of heightened market volatility.
Markets remain on tenterhooks that a move away from ‘Zero Covid’ could be forthcoming. We remain sceptical, given the slowdown in the booster rollout and the recent NHC press conference which poured cold water on a rapid pivot.
Q3 GDP was delayed - likely to avoid highlighting this year’s growth target was out of reach during the Party Congress - and then came out stronger than expected.