China: CNY finds support in growth momentum – MUFG

China’s Q3 GDP growth strengthened to 4.5% year-on-year, MUFG’s Michael Wan notes. The reading was slightly above consensus. September industrial production picked up pace, while contractions in fixed asset investment narrowed. Wan highlights that firmer production leaves the annual growth target within reach. However, domestic demand and property investment remain uneven, a key consideration when assessing whether support for the Chinese Yuan can be sustained.

4.5% growth: demand remains uneven

"China’s economy gained momentum in Q3, led by stronger industrial production, although domestic demand remained uneven. GDP growth rose to 4.5%yoy from 4.3%yoy, slightly above consensus of 4.4%yoy, leaving growth at 4.6%yoy YTD. September industrial production accelerated to 5.5%yoy, while the monthly contraction in fixed asset investment narrowed after four months of double-digit declines."

"Stronger production has yet to translate into a convincing recovery in household demand or property investment. Retail sales improved to 1.1%yoy from 0.4%yoy, greatly exceeding the 0.5%yoy estimate, with it benefiting from the Mid-Autumn Festival falling in September."

"The improvement in production and narrower monthly investment contraction helped keep the annual GDP target within reach. For CNY, firmer activity provides a more supportive domestic backdrop, although the composition of growth remains important in assessing whether this improvement can be sustained."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)