China’s Economic Growth Slows as Property Crisis Deepens

China's economic growth for Q3 2024 fell short of government expectations, with a GDP increase of 4.6%, down from 4.7% in the previous quarter.

This decline is largely due to weak consumer spending and a troubled property market, which has affected consumer confidence despite Beijing’s efforts to stimulate the economy.

In late September, China implemented its largest monetary stimulus since the pandemic, followed by promises of significant fiscal spending. However, investor optimism quickly diminished as they awaited clearer details. The CSI 300 and Hong Kong’s Hang Seng indices suffered notable declines in October, reflecting ongoing economic concerns. Recent government interventions in the property sector have proven inadequate, leaving developers in distress.

Looking ahead, a meeting of the National People’s Congress is anticipated to address a potential fiscal stimulus package that could reach 10 trillion yuan (around $1.4 trillion). Experts warn that simply injecting funds may not solve deeper issues, and the coming months will determine if China can navigate its economic challenges or face a prolonged downturn akin to Japan’s “Lost Decade.”

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On a brighter note, retail sales grew by 3.2% year-on-year in September, slightly exceeding expectations. In comparison, U.S. retail sales rose by 0.4%.

While the Dow Jones increased by 0.37%, China’s Shanghai Composite rose by 1.5% on encouraging economic data and hints of monetary easing from the central bank. However, the property market crisis continues to be a significant burden, with a recent 6.7% drop in the Hang Seng Mainland Properties index. Government support has been insufficient, and local governments face mounting debt, raising the risk of a broader financial crisis.

Alexander Stefanov