By Lewis William, Senior Financial Analyst at Triangle Profits
Introduction
China’s economic performance in the second quarter of 2024 has drawn considerable attention and concern, especially with its GDP growth missing expectations. As one of the world’s largest economies, China’s growth rate is a critical indicator of global economic health. Let’s dive into the details and implications of this slowdown.
Q2 GDP Growth: A Missed Target
China’s GDP grew by 4.7% year-on-year in Q2, significantly below the forecasted 5.1% and a decline from Q1’s 5.3% growth. On a quarterly basis, the GDP increased by a mere 0.7%, missing the expected 1.1% growth. This marks a notable deceleration from the previous quarter’s 1.6% growth rate Key Factors Affecting Growth
- Weaker Consumption: Consumer spending has been sluggish, failing to drive the expected economic momentum. June’s retail sales rose by only 2.0%, below the anticipated 3.3%.
- Property Market Downturn: The property sector continues to struggle, with investment plummeting by 10.1% in the first half of the year. This persistent decline highlights the need for more robust policy measures to stabilize the market.
Sectoral Performance
- Industrial Production: Despite the overall slowdown, industrial production showed resilience with a 5.3% increase in June, surpassing the forecasted 4.9%. However, this was still a dip from May’s 5.6% growth.
- Fixed Asset Investment: Investment in fixed assets rose by 3.9% in the first six months, aligning with expectations but slightly down from the 4.0% gain in the previous five months.
Policy Implications and Future Outlook
Economists at Capital Economics suggest that economic growth might regain momentum in the coming months due to expected property support measures, robust exports, and increased fiscal spending. However, sustaining this growth in the medium term remains a challenge.
Central Bank Interventions
In response to the economic slowdown, the People’s Bank of China has injected liquidity into the banking system. The central bank conducted a CNY 100 billion one-year medium-term lending facility at an interest rate of 2.50%, unchanged from the previous operation. Additionally, CNY 129 billion was injected through seven-day reverse repo operations.
Conclusion
China’s Q2 economic performance underscores the challenges facing its economy amid weaker consumer spending and a struggling property market. While short-term measures may boost growth, sustained recovery will require comprehensive policy support. Investors and analysts will closely watch China’s policy responses and economic data in the coming months.