China's expansion keeps on demonstrating signs of slowdown
China's economic growth is showing signs of slowing down. According to Beijing's statistical bureau, the country's economy, which is the world's second largest, expanded by 4.6% year-on-year in the third quarter. This figure is 0.1 percentage points lower than the growth rate in the second quarter. interestingly, this growth rate was slightly above analysts' expectations, who were anticipating a 4.5% growth rate on average.
In response to the persistent economic sluggishness, China's government announced a stimulus package towards the end of September. However, the package did not provide detailed information about the amount of additional debt that would be incurred to boost consumer spending. This news initially sparked optimism on stock markets, but that optimism quickly faded.
The ongoing crisis in the real estate sector has been contributing to China's economic slowdown. Due to uncertainties, consumers are hesitant to spend money, putting pressure on consumption in the world's second-largest economy.
Doubts about Increasing the Growth Target
Economist Max Zenglein of the Mercator Institute for China Studies in Berlin believes that while the government's measures are addressing the economy's challenges, the stimulus is still cautious, particularly when it comes to boosting consumer spending. Given the challenges posed by the downturn in the real estate market, the announced measures appear more stabilizing than growth-enhancing.
There is no sign of a fundamental shift in Beijing's economic policy. "Promoting industrial strength in the tech sector remains the top priority," says Zenglein. The country's leader, Xi Jinping, is sticking to his plan to modernize the economy through the tech sector, thereby changing the basis of growth. Some segments of the middle class are paying the price for this strategic goal.
Beijing Sees Possibilities for Recovery
Despite the announced support measures, analysts are skeptical that Beijing will achieve its goal of a 5% growth rate this year. Sheng Laiyun, a spokesperson for the Beijing statistical bureau, however, is confident that the target can still be met. He notes that while the Chinese economy is experiencing pains of structural change, it has managed to maintain a stable trend under pressure.
Furthermore, Sheng did not rule out the possibility of additional support measures. "There is still a lot of room for further measures, and the value of the measures already implemented is also very high," he said. There are signs that the economy is stabilizing and may even recover in the fourth quarter. For example, electricity consumption and the prices of some production materials have increased since early October. Additionally, strong consumer spending during the holidays around China's National Day on October 1 is cause for optimism.
Despite the challenges in boosting consumer spending, economist Max Zenglein acknowledges that China's government measures are helping to address the economy's issues. however, he suggests that the stimulus package is more stabilizing than growth-enhancing, given the real estate sector crisis.
In light of the skepticism about meeting the 5% growth rate this year, Beijing's statistical bureau spokesperson, Sheng Laiyun, remains optimistic. He highlights the economy's ability to maintain a stable trend under pressure and the potential for additional support measures to help in the recovery.
