A press conference on the sensitive issue of economic growth was held outside the main stage of China’s 20th Party Congress on Monday.
“The economy recovered 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 was due to be released. The country’s performance, he added, was “excellent”.
But hours later, the government’s statistics department quietly updated its website to clarify that the data would be delayed, without further explanation or comment. Economists had forecast growth of just 3.3 percent, well below the country’s long-term average and target of 5.5 percent for the year.
It was seen in some circles as an attempt to avoid distraction from China’s biggest political event in years, but the delay nonetheless came at a time when growth in Beijing has become an inconvenient topic.
China’s economy — which has supported the communist party’s governance model for decades and is recently on track to become the world’s largest — is beset by a real estate crisis and strict zero-covid controls that have dampened consumer spending through frequent and intense lockdowns.
“That slightly more than 3 percent undergrowth is probably the best they can get with strict Covid management and the drag on the housing sector,” said Robin Xing, chief economist China at Morgan Stanley.
“The only meaningful policy lever they have for next year is the change in Covid management aimed at reopening.”
But the government, both at the congress and in the run-up to the event, has strengthened its zero-Covid approach, refusing to provide a timetable for reopening. A Goldman Sachs tracker of China’s Covid policy notes that cities with high- and medium-risk districts now account for 40 percent of the national gross domestic product, which they say implied “continued pressure on consumption and services in October.” .
Aidan Yao, senior emerging Asia economist at Axa Investment Managers, said the discussion about zero-Covid was “looking backwards” and the policy would likely continue under the same name, even if there was room to tweak its implementation.
Other releases, including those on house prices in China’s 70 largest cities and customs data, expected on Friday, have also been postponed.
Given the tightly controlled language of Congress, which tends to focus on China’s longer-term and overarching ambitions, analysts are quick to spot omissions that indicate a shift in priorities. Research platform CreditSights said President Xi Jinping’s opening remarks on Sunday did not address market reforms, financial institutions and the data economy, which have been highlighted as key areas at previous conferences.
However, he stated that the country would “make better use of the fundamental role of consumption in driving economic growth” and address “unbalanced development”. Morgan Stanley’s Xing suggested the event had thus far allayed fears of a shift from economic development to security of energy, food and supply chains.
“I would say the concern in the market before the party congress was that China might shift the policy agenda of the economy,” he said. “But I think the story of the party congress here allays those concerns.”
Xi reiterated the need to build a “moderately prosperous” society by 2035, which entails a GDP per capita equivalent to a median developed economy. Xing suggested this implied GDP per capita would be $20,000-$24,000 per year, compared to just over $12,000 in 2021. That would imply a growth rate of about 4.5 percent through 2035.
This week’s unpublished GDP figures could be significantly lower than that and could pave the way for growth at levels lower than the 6 percent or more held in the decades leading up to the pandemic.
Axa’s Yao also pointed to the emphasis on economic development in Xi’s comments, including his “unwavering support” for the private economy, which Yao said “would be a relief to many”. He suggested the show marked the end of a series of regulatory and private sector crackdowns in 2021, including the education and technology sector.
While GDP may pose a challenge to Chinese authorities, other statistics are more promising compared to other major economies. At Monday’s NDRC press conference, Chenxin pointed to “moderate” increases in consumer prices in China, which contrast sharply with an environment of rising prices and tariffs elsewhere. Consumer price inflation was only 0.6 percent 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 later became a crisis for property developers. But weak price increases are also intertwined with China’s Covid restrictions and their depressing impact on spending.
For now, lifting the strict Covid policy remains the main hope for a major pick-up in growth – even if it’s unlikely to materialize for multiple quarterly GDP figures.