China's Economic Slowdown Deepens Amid Property Crisis and Structural Challenges
China’s economic slowdown has deepened, with the country’s gross domestic product (GDP) rising by just 4.6% in the third quarter of 2024 compared to the same period last year. This marks the slowest pace of growth since early 2023 and falls short of the government’s annual target of “around 5%,” raising concerns about the outlook for the world’s second-largest economy.
While the 4.6% growth exceeded analysts' expectations, it was lower than the previous quarter’s performance. This marks the second consecutive quarter that China has missed its growth target, heightening pressure on Beijing to implement further economic stimulus measures.
Government Measures and Stimulus
In response to the slowdown, China has rolled out a series of measures aimed at boosting growth. The People’s Bank of China (PBOC) recently introduced the largest stimulus package since the COVID-19 pandemic, including cuts to interest and mortgage rates, support for the stock market, and incentives to encourage banks to lend more to businesses and consumers.
However, experts remain divided on whether these measures will be enough. Eswar Prasad, the former head of the International Monetary Fund’s (IMF) China division, noted that the country’s annual growth target "now appears in serious jeopardy" and that a "substantial stimulus-fuelled boost" would be needed in the fourth quarter to hit the 5% target.
On the other hand, Harry Murphy Cruise, an economist at Moody’s Analytics, expressed optimism, suggesting that the stimulus is “likely to propel the economy to its around 5% target for the year.” Still, he warned that more significant reforms would be required to tackle China’s structural economic challenges.
Worsening Property Crisis
One of the largest drags on China’s economy remains the troubled property sector. September saw new home prices fall at the fastest pace in nearly a decade, further intensifying the sector’s downturn. This property crisis is a major concern for China, given the sector's critical role in driving domestic investment and household wealth.
Lynn Song, chief economist for Greater China at ING, highlighted the property sector’s continuing strain on economic growth, stating that “new investment is unlikely to see a substantive recovery until prices stabilize and housing inventories decline.” Song emphasized that until the real estate market rebounds, it will continue to act as a “notable headwind to growth.”
Broader Economic Challenges
China’s economy faces additional headwinds, including weak consumer demand, declining business confidence, and challenges in both domestic and international markets. Despite Beijing’s efforts, the economy continues to struggle with long-term structural issues, such as high levels of corporate and local government debt, a shrinking labor force, and a shift away from export-led growth.
Looking forward, many analysts agree that while Beijing's stimulus measures may provide a short-term boost, more comprehensive reforms are required to address the underlying weaknesses in China’s economic model. These include efforts to stabilize the property sector, support small and medium-sized enterprises, and encourage greater consumer spending to drive sustainable growth.