China’s economy slowed more than expected in the fourth quarter, raising the possibility that a meeting of senior government officials in Beijing this week will announce efforts to reignite growth.
China, the world’s second-largest economy, expanded 4.7% year-on-year in the April-June period. Office for National Statistics The results, released on Monday, were lower than the 5.3 percent growth in the March quarter and the 5.1 percent growth that economists had forecast.
The real estate sector continues to retreat, with total sales of new commercial buildings falling 25% in the first half of 2024. Retail sales fell 0.12% in June from May, highlighting weak consumer sentiment and potentially making it difficult for China to meet its full-year GDP growth target of around 5%.
The relatively weak quarterly results were buoyed by a record trade surplus of nearly $100 billion in June alone, as surplus manufacturing goods were shipped overseas. Trade barriers could rise, especially if Donald Trump is re-elected as U.S. president later this year, increasing pressure on China’s leaders to reignite domestic growth.
The figures were released as China’s top officials gathered in Beijing on Monday for a key political conference where government officials have historically announced sweeping changes to economic policy.
Chinese President Xi Jinping will preside over the Communist Party’s secretive Third Plenum, usually held every five years in October, but Beijing has given few hints about the agenda.
State media reported in June that the postponed four-day meeting would “mainly consider issues relating to further comprehensively deepening reform and promoting China’s modernization”, with Xi saying the party was planning “large-scale” reforms.
Analysts hope these promises will bring much-needed support to the economy.
“It is never too late to wait for the next General Assembly,” Sarah Tan and Hallie Murphy-Cruz wrote for Moody’s Analytics last week.
Beijing should take decisive steps, they said, such as reforming the real estate sector, easing internal migration restrictions, expanding the pool of high-skilled jobs for university graduates and revising tax systems to reduce local government debt.
But they added that leaders would “probably” avoid sweeping reforms, opting instead for “modest policy adjustments to expand high-tech manufacturing and sprinkle support for housing.”
The Communist Party’s mouthpiece, the People’s Daily, appeared to confirm these low expectations last week when it warned that “reform is not about changing direction, and transformation is not about changing color.”
Ting Lu, Nomura’s chief China economist, said the meeting was “aimed at generating and discussing big-scale, long-term ideas and structural reforms, rather than making short-term policy adjustments.”
In the past, the third plenary session has been an opportunity for the party’s top leadership to announce major shifts in economic policy.
At the conference in 1978, then-leader Deng Xiaoping announced market reforms that would open China to the world and put it on a path of rapid economic growth.
More recently, after a closed-door meeting in 2013, the leadership pledged to give free markets a “decisive” role in resource allocation and to carry out fundamental reforms of economic and social policies.
Authorities have made clear that they want to shift the economy away from state-sponsored investment and focus growth on high-tech innovation and domestic consumption.
But economic uncertainty is creating a vicious cycle that keeps consumption stubbornly low.
One of the most pressing problems facing the economy is the struggling real estate sector, long a key driver of growth but now mired in debt, with several major companies facing liquidation.
Authorities have taken steps in recent months to ease pressure on property developers and restore confidence, including by encouraging local governments to buy up unsold homes.
More than 18 months after anti-COVID-19 restrictions ended, the country’s economy has yet to recover and much more is needed for a full recovery, analysts say.
Agence France-Presse contributed to this report.
