China: Xi Jinping tackles slow growth as economy ‘hits the brakes’
China’s economy stumbled in the second quarter, standard data reveals, just as the country’s best leaders gathered for a important meeting to solve its slow progress.
It grew 4.7% in the three months to June, falling short of expectations after a stronger start in the first three months of 2024. The government’s annual growth target is around 5%.
” China’s market hit the brake in the June fourth”, said Heron Lim at Moody’s Analytics, adding that experts are hoping for answers from the conference under way in Beijing, even called the Third Plenum.
The country’s second-largest business is facing a prolonged residence problems, rough local government debt, poor consumption and high unemployment.
In China, the outcome of the Plenum has influenced the course of history. Deng Xiaoping first opened China’s industry to the world in 1978, and Xi Jinping made hints in 2013 about loosening the contentious one-child plan.
And so there are objectives of this year’s Plenum, where President Xi Jinping is presiding over a closed-door meeting of 370-plus high-ranking Chinese Communist Party people.
The language on state-controlled multimedia has undoubtedly been encouraging.
An editor in The Global Times said a “wide collection of reform-focused safeguards” are “high on the plan” and may usher in a “new book”. Xinhua referred to” complete” and “unprecedented” measures. A “new age of transformation and beginning up” was the subject of the People’s Regular newspaper, which Deng famously coined in 1978.
Spectators, however, are unaware of how much room there is for striking suggestions or controversy in the Party under Mr Xi’s heavily-centralised management. Some people view the appointment as merely a rubber-stamping exercise for already-made choices.
The appointment may provide a quick fix, according to economists, who are also skeptical.
It has “little effect on near-term growth”, says Qian Wang, Asia Pacific chief analyst at Vanguard, because its target will be on longer-term and more important measures to “unleash the long-term development potential”.
However, experts will become watching for disclosures that signal the Party’s financial priorities.
Separate data from Monday showed that June’s fresh home prices dropped at the fastest rate in nine times.
This provides more information of the global property issue that has decimated China’s housing sector and caused the bankruptcy of eminently successful companies like Evergrande. There’s a chance that it could spread to different sectors of the economy.
” There are more than 4, 000 businesses in China and over 90 % are smaller, regional institutions which are very exposed to the housing market and local authorities bill”, says Shanghai-based analyst Dan Wang.
She thinks that group leaders will “push for the consolidation of little banks.”
Another problem is falling pricing, which is a sign of weak demand. Retail sales increased by only 2 % in June, which is below expectations and a sign that consumers are still cautious about spending and uncertain about the future.
” A major problem is the loss of family, firm, and investor confidence in the government’s ability to navigate the deadly financial environment”, said Eswar Prasad, former head of the International Monetary Fund’s China division.
Questions remain about Beijing’s willingness to offer the kind of solution that would appeal to both observers and the markets.
” The government is reluctant to turn to short-term stimulus plans such as cash transfer to families”, Dan Wang said. Instead, we anticipate that they will focus on strengthening supply chains and high technology once more.
That is in line with Beijing’s bets on high-tech industries such as renewable energy, AI and chip-making, and exports to revive the economy. Last month, China reported a record trade surplus-$ 99bn ( £76.4bn )- as exports soared and imports struggled.
But even that wager has challenging odds. Important trading partners like the United States and the European Union have imposed tariffs and other restrictions on everything from EVs to cutting-edge chips made in China.
Additionally, he highlighted the emergence of a circular economy to facilitate long-term sustainability, as being a growing trend: “Look at the battery ecosystem for example, a huge industry is developing around the recycling of batteries – additionally the recycling of solar panels, turbines and so forth is being considered. The recycling industry is becoming larger as ultimately, unless there is a circular economy around it, resources will be wasted. New action is being taken to develop a fully circular product lifecycle.”