China reported this week that its economy expanded by 4.9% in Q3 relative to the previous year. While this was a little lower than the consensus estimate, the overall picture remains positive, as the growth rate increased from that reported in Q2, and the composition of growth appeared to be on more solid footing – i.e. driven by demand rather than government-directed investment. Our measure of Chinese economic activity, the CMI 3.0 (blue line in the chart), suggests that annual growth was a more modest 3.4% in September (and 1.8% in Q3 as a whole), although this is still an impressive outturn. This news is positive for global demand, but China’s economic performance is unlikely to be particularly useful for predicting the outturn in other countries, due to: a) structural differences between the Chinese economy and those in other countries, and b) the fact that China seems to have got the virus under control while many other large economies have not.
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