China's Economic Slowdown Worsens, Official Statistics Reveal Troubling Trends

18 Oct, 2024

China's economy has shown signs of significant strain, expanding at its slowest pace since early last year. According to the National Bureau of Statistics, the gross domestic product (GDP) rose by 4.6% year-on-year for the third quarter ending in September. This growth rate is below both the previous quarter's figures and the government's target of "around 5%" for the year. However, the performance was slightly better than analysts' expectations, with other economic indicators, such as retail sales and factory output, also surpassing forecasts.

In response to these challenges, Beijing has rolled out several measures aimed at stimulating growth. This marks the second consecutive quarter where China's economic growth has fallen short of the 5% target, intensifying government concerns. Eswar Prasad, a former head of the International Monetary Fund's China division, stated that the government's growth target for this year now appears at serious risk, suggesting that significant stimulus efforts will be required to boost growth in the fourth quarter to meet this target.

Conversely, Harry Murphy Cruise from Moody's Analytics expressed a more optimistic view, believing that the stimulus measures could still propel the economy to meet the 5% target for the year. Nonetheless, he emphasized the need for further action to address underlying structural issues within the economy.

Official data also revealed a sharp decline in new home prices in September, marking the fastest drop in nearly a decade and highlighting the ongoing downturn in the property sector. Lynn Song, chief economist for Greater China at ING, noted that the property market continues to be the largest impediment to growth. Additionally, the People's Bank of China has recently urged financial institutions to increase lending, while announcing the country's most substantial stimulus package since the pandemic, which includes significant cuts to interest and mortgage rates.

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