China's economy has experienced a significant slowdown in the second quarter of the year, with growth figures falling short of expectations. Official data revealed that the world's second-largest economy grew by only 4.7% from April to June, marking the slowest quarterly growth since early 2023. This is a decline from the previous quarter's growth rate of 5.3% and below analysts' expectations of 5.1%. The prolonged contraction in the real estate sector and job insecurity have contributed to this modest recovery, raising the likelihood that Beijing will need to implement more economic stimulus measures.
The ongoing real estate crisis has exacerbated the economic slowdown. In June, new housing prices fell at the fastest rate in nine years, undermining consumer confidence and limiting the ability of debt-laden local governments to generate revenue through land sales. The government's ambitious goal of achieving around 5% economic growth for 2024 appears challenging and may necessitate further stimulus efforts.
The economic uncertainty has led to low consumption levels, creating a vicious cycle that hinders economic recovery. These developments coincide with the opening of a crucial meeting of China's ruling Communist Party, led by President Xi Jinping. The meeting, known as the 'Third Plenary Session,' focuses on the economy and includes discussions on major reforms aimed at providing much-needed support for the economy.
Despite the disappointing growth figures, exports have shown some positive signs, growing at their highest rate in 15 months in June. However, the global context of geopolitical tensions and trade restrictions, such as the European Union's tariffs on Chinese electric cars, poses risks to China's economic objectives. Imports, on the other hand, fell by 2.3%, reflecting sluggish domestic consumption.
The National Statistics Office (ONE) highlighted the stability of the economic numbers despite the slowdown. The external environment has become more complex and uncertain, with challenges such as insufficient internal demand and a housing market in adjustment. The spokesperson emphasized the need to focus on long-term development rather than short-term fluctuations.
Retail consumption growth has been particularly weak, with a mere 2% annual increase in June, falling short of forecasts. Consumption of cosmetic products, household appliances, and automobiles has seen significant declines. The housing sector remains in a downward spiral, with investment and sales volume continuing to collapse despite government support measures. Private investment has shown minimal growth, with a notable shift towards high-tech industries.
China's economy faces numerous challenges, including inflation, geopolitical conflicts, and international trade frictions. Businesses are under significant pressure, and there are hidden risks in key areas. While the economy has shown resilience, the outlook for the next six months remains uncertain, with an unstable external environment and ongoing domestic challenges.
