China Economic Growth Slows, Raising Expectations for Further Stimulus

China’s economy grew slower than anticipated in the second quarter as a protracted property downturn and job insecurity squeezed domestic demand. This has kept the expectations that Beijing will need to introduce more stimulus measures alive.

Economic Performance and Projections:

According to official data, the world’s second-largest economy grew by 4.7% in April-June, marking its slowest growth since the first quarter of 2023 and missing analysts’ forecast of 5.1% from a Reuters poll. This figure is also down from the 5.3% expansion observed in the previous quarter.

“Overall, the disappointing GDP data shows that the road to hitting the 5% growth target remains challenging,” said Lynn Song, chief economist for Greater China at ING.

“A negative wealth effect from falling property and stock prices, as well as low wage growth amid various industries’ cost-cutting, is dragging consumption and causing a pivot from big-ticket purchases toward basic ‘eat, drink and play’ theme consumption,” he added.

China’s yuan and stocks fell following the disappointing data, reflecting the market’s reaction to the slower growth.

Government Measures and Challenges:

The figures come as Beijing seeks to shore up economic confidence at a highly anticipated third plenum, a key leadership meeting that starts Monday. However, conflicting requirements such as boosting growth and cutting debt complicate these plans.

The government aims for economic growth of around 5.0% by 2024, a target that many analysts believe is ambitious and may require more stimulus.

Growth was 0.7% every quarter, down from a downwardly revised 1.5% in the previous three months.

Infrastructure and High-Tech Investment:

To counter soft domestic demand and a property crisis, China has boosted infrastructure investment and invested in high-tech manufacturing. These measures are part of a broader effort to sustain economic growth amid challenging conditions.