China’s economy hit a stumbling block in the second quarter of 2024, growing at a sluggish 4.7% – its slowest pace since early 2023. This disappointing performance falls short of analysts’ expectations and raises concerns about the world’s second-largest economy.
The primary culprits? A prolonged property market downturn and increasing job insecurity. These factors have significantly dampened consumer confidence, leading to a noticeable decline in retail sales. In fact, June saw retail sales growth hit an 18-month low, with businesses slashing prices across various sectors to combat deflationary pressures.
Moreover, the property crisis has deepened, with new home prices in June falling at the fastest rate in nine years. This decline not only affects consumer sentiment but also hampers local governments’ ability to generate funds through land sales.
As a result of these challenges, many experts now believe that Beijing will need to implement additional stimulus measures to achieve its ambitious 5% growth target for 2024. The government has already taken steps to boost the economy, including increased infrastructure investment and funding for high-tech manufacturing.
However, the road ahead remains uncertain. While exports have provided some support, rising trade tensions pose a potential threat. Additionally, the manufacturing sector, though outperforming expectations in June, has shown signs of slowing growth.
To address these issues, China’s central bank has pledged to maintain a supportive monetary policy. Analysts anticipate potential interest rate cuts and reductions in banks’ reserve requirements in the coming months. Furthermore, the government is expected to announce additional measures to support the struggling property sector.
China faces significant economic challenges as it strives to meet its growth targets for 2024. The success of future policies in reviving the property market and encouraging domestic spending will likely define the country’s economic trajectory for the remainder of the year. As global markets watch closely, China’s ability to navigate these obstacles will have far-reaching implications for the world economy.
With inputs from Reuters
