China’s economic growth slowed to 4.6% in the July-September quarter, marking the weakest pace since early 2023. This sluggish performance came despite recent efforts to stimulate consumer demand and revive the ailing property sector. The latest data released by the Xi Jinping government revealed the world’s second-largest economy struggling to meet the official target of “about 5 per cent” growth for 2024. Many analysts view this target as ambitious without more decisive measures to boost consumer spending and revitalize the property market.
Despite the slowdown, China’s economy showed some signs of resilience. The National Bureau of Statistics, in a statement, declared that the economy remained “generally stable with steady progress” even amidst a “complicated and severe external environment” and complex domestic economic conditions. However, the continued weakness in the property sector continues to pose a significant challenge for China as it seeks to boost growth.
China’s economic recovery has been hampered by several factors. Despite lifting COVID-19 restrictions towards the end of 2022, consumer confidence has remained weak, impacting spending. The real estate market has also weighed heavily on the economy.
In recent weeks, Chinese policymakers have implemented a series of measures aimed at stimulating the economy. These measures include reductions in mortgage rates for existing homes and allowing banks to increase lending by lowering reserve requirements.
Despite these efforts, economists remain cautious. Woei Chen ho, an economist at UOB in Singapore, noted that while the nominal GDP has stabilized, the growth rate remains similar to the second quarter. The focus now shifts to the government’s next steps and the potential scale of fiscal stimulus.
Benson Wu, China and Korea economist at Bofa Global Research in Hong Kong, highlighted the importance of coordinated easing and improved policy communication. While the recent measures are a positive step, Wu anticipates the annual GDP growth to reach around 4.8% this year, potentially nearing the lower bound of the 5% target. He believes that the success of growth in the coming year will heavily depend on the yet-to-be-announced fiscal package.
Other economists echoed concerns about the sustainability of growth. Toru Nishiama, Chief Economist at Tokyo’s Dai-Ichi-Life Research Institute, expressed concern over a potential deflationary spiral due to excess supply and insufficient demand. He questioned the sufficiency of the recent stimulus measures and highlighted the need to address underlying structural problems.
Shane Oliver, Chief Economist at AMP in Sydney, suggested that the September data might be influenced by normal volatility and not solely due to the stimulus announced earlier that month. While he acknowledged continued growth, he cautioned that the pace remains subdued by historical standards. In the absence of significant stimulus, Oliver expects growth to fall below the 5% target, potentially reaching 4.6% or 4.7% for the year.
Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management, noted that the marginal decline in Q3 growth makes achieving the 5% official growth target challenging. He emphasized the government’s shift in policy stance towards growth and the need for clarification on fiscal stimulus. Zhang believes that further details may be unveiled in November, potentially influenced by the outcome of the US elections.
With the global economy facing a challenging landscape, China’s economic performance will be closely watched. The government’s upcoming fiscal stimulus package will be crucial in determining the trajectory of growth in the coming months and years. The effectiveness of these measures will be critical in addressing the challenges facing China’s economy, including weak consumer confidence and the lingering impact of the property sector slump.
