China's Q3 GDP grows 4.9% y/y, beats market forecast

China's economy grew at a faster-than-expected clip in the third quarter from a year earlier, official data showed on Wednesday, suggesting the recent recovery may carry enough steam to reach Beijing's full-year growth target.

Gross domestic product (GDP) grew 4.9% in July-September from the year earlier, data released by the National Bureau of Statistics showed, versus analysts' expectations in a Reuters poll for a 4.4% increase but slower than the 6.3% expansion in the second quarter.

On a quarter-by-quarter basis, GDP grew 1.3% in the third quarter, accelerating from a revised 0.5% in the second quarter, and the rate was above the forecast for growth of 1.0%.

Thanks to a slew of policy measures in recent months, the world's second-biggest economy has started to show signs of stabilising, but a protracted property crisis, uncertainties over employment and household income and weak confidence among private firms pose risks to a durable revival.

The yuan CNY=CFXS strengthened as much as 0.35% to 7.2905 per dollar after the data release, before giving up some gains. The Chinese currency on Tuesday hit one-month lows, pressured by the firming dollar, a weak economy, and a widening yield gap between China and the US The yuan has lost about 5.5% against the dollar so far this year.

Chinese stocks were muted after the GDP data release. Both the Shanghai Composite index .SSEC and the blue-chip CSI 300 Index .CSI300 were down about 0.5% in early morning trading.

The world's second-largest economy faltered in the second quarter after a brief post-COVID recovery, dragged by a property downturn and huge debt due to a decades-long infrastructure binge.

China's exports and imports have continued to decline, although at a slower pace. And while bank lending has jumped, persistent deflationary pressures underline the challenges policymakers face in trying to revive activity.

Economists remain concerned about the crisis-hit property sector, employment and household income and weak confidence among some private firms.

The central bank rolled over maturing medium-term policy loans earlier this week, while keeping the interest rate unchanged, matching market expectations.

In September, the central bank cut the RRR - the amount of cash that banks must hold as reserves - for the second time this year to boost liquidity and support the economic recovery. Other policy support included interest rate cuts, property easing and efforts to shore up the private sector.

Beijing may step up fiscal stimulus to get activity on a more solid footing, though the impact may not be felt until well into 2024, analysts said. The central bank is constrained in how much it can ease monetary policy for fears of hurting the yuan.