Official statistics have shown that China’s economy as of Monday, 15th July 2024, grew by 4.7 percent in the second quarter of the year, representing the slowest rate of expansion since early 2023 and grossly opposing Bloomberg’s 5.1 percent prediction.
This was made known in a post by China, referencing a below-expectation performance in the country’s economy which is currently being faced with a malaise.
According to reports, a key meeting has also been scheduled for top officials to meet in Beijing, the capital city of China on Monday, with hopes high that the top officials will discuss on how to salvage the economic crisis the country is currently grappling with.
China, which is the world’s second-largest economy is reportedly grappling with a real estate debt crisis, weakening consumption and an ageing population.
According to reports, its malaise is not devoid of the country’s trade battles with the United States and the European Union which have sought to limit Beijing’s access to sensitive technology as well as putting up tariffs to protect their markets from cheap, subsidised Chinese goods, are also dragging growth down.
According to the National Bureau of Statistics, China’s retail sales which is a key gauge of consumption rose just two percent in June, down from 3.7 percent growth in May.
The body said, “The external environment is intertwined and complex, adding that “domestic effective demand remains insufficient and the foundation for sound economic recovery and growth still needs to be strengthened” in the country.
Meanwhile, Chinese President, Xi Jinping, while delivering a “work report” at the opening of a key meeting by China’s ruling Communist Party, Monday, focused on the economy, known as the Third Plenum.
According to reports, the Chinese leader “expounded on a draft decision of the (Communist Party) Central Committee on further comprehensively deepening reform and advancing Chinese modernisation.”
Xi also stated that, Beijing has offered few hints about what might be on the table, adding that the party is planning “major” reforms.
This has sparked interest amongst analysts who are hoping those pledges will result in badly needed support for the economy.
In a statement, Harry Murphy Cruise, an economist at Moody’s Analytics said, “The four-day meeting of the country’s top governing body couldn’t come soon enough.” He however noted that, “while the case for reform is high, it’s unlikely to be a particularly exciting affair.”
Murphy added that, “Instead, we expect a modest policy tweak that expands high-tech manufacturing and delivers a sprinkling of support to housing and households.”
In a related development, the People’s Daily, the Communist Party’s official newspaper, appeared to confirm lower expectations when it warned last week that “reform is not about changing direction and transformation is not about changing colour”.
In a note, chief China economist at Nomura, Ting Lu, said the meeting was “intended to generate and discuss big, long-term ideas and structural reforms instead of making short-term policy adjustments”.
According to him, the Third Plenum has previously been an occasion for the party’s top leadership to unveil major economic policy shifts adding that in 1978, then-leader Deng Xiaoping used the meeting to announce market reforms that would put China on the path to dazzling economic growth by opening it to the world.
Recall that after a closed-door meeting in 2013, Beijing’s leadership pledged to give the free market a “decisive” role in resource allocation, as well as other sweeping changes to economic and social policy.
It also said it is aiming for five percent growth this year. However, the economic uncertainty in the country is also fuelling a vicious cycle that has kept consumption stubbornly low.
According to a government official, Macquarie’s Larry Hu, among the most urgent issues facing the economy is the beleaguered property sector, which long served as a key engine for growth but is now mired in debt, with several top firms facing liquidation.
Hu stated that “the slowing momentum in (the second quarter) means that they may miss the five percent annual growth target without a step-up in policy supports,” adding that “Domestic demand remains very weak and that property is the biggest drag.
Relatedly, authorities have in recent months, moved to ease pressure on developers and restore confidence, including by encouraging local governments to buy up unsold homes. This is even as analysts say much more is required for a full rebound, as the country’s economy has yet to bounce back more than 18 months after damaging Covid-19 restrictions ended.
