In the first quarter of 2024, China’s economy had a stronger start than expected despite challenges in the property sector. Official data showed that the gross domestic product (GDP) had expanded by 5.3% compared to the previous year, surpassing predictions of a 4.6% growth rate for the first quarter. Beijing had set an annual growth target of around 5% for the year.
Despite this positive start, first quarter retail sales growth in China fell to 3.1%, indicating a decline in consumer confidence. Analysts suggest that for China to achieve its growth target, it will need to see increased household spending. Additionally, property investment dropped by 9.5% during the same period, highlighting the difficulties faced by real estate firms in the country.
The ongoing property market crisis in China has had significant implications for the economy, with the sector accounting for around 20% of GDP. Recent data showed that new home prices fell at the fastest rate in over eight years in March. Major property developers like Evergrande, Country Garden, and Shimao have faced challenges, with some being ordered to liquidate by courts.
In light of these economic challenges, credit ratings agency Fitch recently downgraded its outlook for China’s economy from stable to negative at its annual review in March. At the annual gathering of China’s leaders in March, officials announced that the economy had grown by 5.2% in 2023. While China’s economy had historically seen rapid growth, with an average annual GDP growth of nearly 10%, it now faces a range of challenges that could impact its future trajectory.
China’s property market crisis has also led to concerns about debt levels and asset bubbles within real estate firms and other sectors such as local governments and state-owned enterprises (SOEs). The government has implemented measures such as curbs on mortgage lending and caps on local government debt levels to address these issues.
Furthermore, there are increasing tensions between China and its trading partners such as Australia and Canada due to issues related to technology transfer restrictions and cybersecurity laws.
Overall, while China’s economy has shown resilience in recent years despite various challenges such as trade wars and slowing global demand for commodities like oil and gas, it still faces significant obstacles that may affect its long-term growth prospects.