There was slowing in China’s economy in the second quarter of 2024 due to a prolonged property downturn and job insecurity, which have dampened domestic demand. This situation has fueled expectations that Beijing may need to introduce more stimulus measures. According to a Reuters poll, data released on Monday is expected to show that the world’s second-largest economy grew by 5.1% year-on-year in April-June, down from 5.3% in the previous quarter and marking the weakest growth since the third quarter of 2023.
China is gearing up for a crucial third plenum, a key leadership meeting starting Monday, aimed at boosting economic confidence. However, the challenge lies in balancing growth and debt reduction. Analysts from Citi predict a 5.1% year-on-year GDP growth for the second quarter, but warn that weak domestic demand could dampen inflation and production.
The economy is expected to grow by 1.1% in the second quarter, down from 1.6% in the first quarter. The government has set an ambitious growth target of around 5.0% for 2024, which may necessitate additional stimulus measures. To address weak domestic demand and a property crisis, China has increased infrastructure investment and directed funds towards high-tech manufacturing.
The Outlook
In May, authorities permitted local state-owned enterprises to purchase unsold completed homes. To support this initiative, the central bank established a 300-billion-yuan (approximately 42.25 billion USD) relending loan facility aimed at promoting affordable housing.
China’s exports grew by 8.6% in June compared to the previous year, while imports unexpectedly fell by 2.3%. This trend suggests that manufacturers might be frontloading orders to avoid tariffs from trade partners.
Consumer prices increased for the fifth consecutive month in June but did not meet expectations. Factory deflation continued, indicating that government measures have not significantly boosted domestic demand.
GDP data is scheduled for release on Monday at 0200 GMT. Additionally, June’s activity data is expected to show a slowdown in both industrial output and retail sales. Translating to further slowing in China’s economy.
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