China's GDP grew stronger than forecast, but risks remain

China's economic recovery in the third quarter was stronger than expected, but COVID-19 curbs, a lingering real estate market crisis and risks of a global recession are hampering Beijing's efforts to spur a strong economic recovery next year.

Gross domestic product for the world's second-largest economy grew 3.9 percent in the third quarter, higher than analysts' forecasts of 3.4 percent, according to official data.

The data release was originally scheduled for Oct. 18, but its release was delayed amid last week's Communist Party congress, where Xi Jinping was elected to a third term as general secretary of the ruling Communist Party of China.

According to Xi, who spoke to reporters on Sunday, China's economy has great resilience, high potential and ample opportunities, its strong fundamentals will not change, and it will remain on a trajectory of stable development in the long term.

The economy's growth was driven by the manufacturing sector: according to some data, industrial production in September rose 6.3% year-on-year, exceeding expectations for growth of 4.5%.

But even with growth, the economy is facing numerous challenges, both nationally and internationally. The containment of the spread of COVID-19 in China and the crisis in the property sector exacerbate external pressures due to a slowdown in the global economy caused by higher interest rates to curb high inflation.

According to a Reuters poll, China's economic growth forecasts fell to 3.2% in 2022, well below the official target of 5.5% and representing one of the worst economic growth rates in 50 years.

September export growth was 5.7% year-on-year, beating expectations, but at the slowest pace since April. Imports rose a modest 0.3%, falling short of the projected 1.0% growth rate.

Retail sales growth was 2.5%, below the 3.3% growth forecast and indicative of fragile domestic demand.

Urban unemployment rose to 5.5% in September, the highest level since June, and the unemployment rate for 16- to 24-year-old job seekers was 17.9%.

Policymakers have developed more than 50 economic support measures since late May to relieve pressure on the labor market, with little emphasis on the importance of reaching the 5.5% GDP growth target set in March.

New bank lending in China nearly doubled in September from the previous month and far exceeded expectations, aided by the central bank's efforts to revive the economy.

Hao Zhou, chief economist at Guotai Junan International, said that on the policy front, policy would generally remain supportive.

In their view, further policy impetus is needed to stimulate economic recovery, but at a time of aggressive rate hikes by central banks around the world, further interest rate cuts are unlikely.