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China has become the first major economy to recover from the Covid-19 pandemic. It grew 4.9% between July and September from a year earlier, up from a 3.2% annual rate in the previous quarter, according to government data.

The growth rate was slightly lower than the 5% or more forecast by analysts, but represents a major reversal from the first quarter of this year when the economy shrank by 6.8% – China’s first contraction since 1992 when officials began keeping quarterly GDP data.

China’s central bank governor Yi Gang said on Sunday that officials predict growth of about 2% for 2020. China is expected to be the only G20 economy to grow this year. The world economy as a whole is expected to shrink by 4.4%, according to predictions from the International Monetary Fund, which would be the steepest downturn since the Great Depression.

The Chinese economy remains resilient with great potential. Continued recovery is anticipated, which will benefit the global recovery.

Here is our full story.

While the growth rate disappointed the market, “it was in fact quite good,” says says Iris Pang, chief economist, Greater China, for ING. The most encouraging factor is consumption, she says.

Retail sales jumped to 3.3% YoY in September from 0.5% YoY in August. This big jump shows that consumption has further stabilised, and there was also evidence of more spending from the business side.

Cross-provincial travel has helped the economy a lot as Mainland China “spenders” have stayed in the home country to spend on tourism services and luxury items in the duty-free shops. These activities have created jobs for low-skilled labour market participants and have helped to further stabilise consumption.

Chinese stock markets rose initially but later fell back. The CSI 300 index dropped 0.87%. Other stock markets in Asia rose, however, with Hong Kong’s Hang Seng gaining 0.5% and Japan’s Nikkei up 1.1%. Confidence was boosted by hopes of a US fiscal package and expectations of a coronavirus vaccine by the end of the year.

It’s a big day for central bank speeches, with US Federal Reserve chair Jerome Powell, European Central Bank president Christine Lagarde and Bank of England deputy governor Jon Cunliffe due to to speak this afternoon. Markets will be looking for further clues as to UK central banks’ leanings when it comes to negative rates.

The pound is lingering above a 10-day low as Brexit talks enter a crunch week. Boris Johnson said on Friday that it was time to prepare for a no-deal outcome when the transitional phase ends on 31 December, alarming markets. The EU’s chief negotiator, Michel Barnier, had been due to travel to London for talks with his UK counterpart David Frost, but they will now speak by telephone.

The Agenda

1pm BST: Fed chair Jerome Powell speech
1:45pm BST: ECB president Christine Lagarde speech
3:05pm BST: Bank of England deputy governor Jon Cunliffe speech

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