China’s economy growing slower than expected as leaders meet for third plenum. China

China’s economy slowed more than expected in the June quarter, raising the possibility that the gathering of top officials in Beijing will unveil efforts to restart growth.

The world’s second-largest economy grew 4.7% in the April-June period from a year earlier, the National Bureau of Statistics said on Monday. The result fell short of 5.3% growth in the March quarter and a 5.1% rate that economists had predicted.

The expansion sector continued to decline, with total sales of new industrial structures down 25% in the first half of 2024. Retail sales in June were down 0.12% from May, underscoring weak consumer sentiment that could spell disappointment for China. Meet your full year GDP expansion target of about 5%.

The slightly weak quarterly result was strengthened by a file business surplus of nearly US$100 billion in June as surplus manufactured goods were shipped overseas. The blackmail of looming trade barriers, especially if Donald Trump is re-elected US president this year, gives China’s leaders the power to restart expansion domestically.

The figures came as top Chinese officials gathered at a major political meeting in Beijing on Monday, at which traditionally secretive officials have unveiled big-picture fiscal policy changes.

“Reversing these (economic) trends should be the main theme of this week’s third meeting,” said Harry Murphy Cruz, economist at Moody’s Investor Services and Products.

However, the five-year program may disappoint those looking for major economic changes because in China “a big policy pivot could be considered an admission of failure and a sure way to lose face”, he said. “Instead, we expect a modest policy change that expands high-tech manufacturing and provides support to housing and households.”

Chinese President Xi Jinping will keep an eye on the secret gathering of the ruling Communist Party. Beijing has given few hints about what may be on the table.

Shape Media said in June that the untimely four-day meeting would “mainly examine issues related to deepening reform and advancing Chinese modernization”, and Xi said the party ” Planning “major” reforms.

Analysts expect these words to provide much-needed support to the financial system.

“The upcoming plenum cannot come soon enough,” Sarah Tan and Harry Murphy Cruz wrote for Moody’s Analytics Extreme Press.

He said Beijing should take decisive action to reform the expansion sector, ease restrictions on internal migration, promote high-skilled jobs for graduates and adjust the tax system to cool local executive debt. Needed

However he also said leaders would “probably not” make sweeping reforms, opting instead for “a modest policy change that would expand high-tech manufacturing and a sprinkle of support for housing”.

The Communist Party’s prestigious newspaper, The Crowd’s Day, felt as if it would detect that people’s expectations were diminishing when it warned the extreme current that “reform is not about changing direction and change is about changing color. It’s not about”.

Ting Lu, chief China economist at Nomura, said the purpose of the meeting was “to generate and discuss big, long-term ideas and structural reforms rather than making short-term policy adjustments”.

The third plenum has so far been a time for the party’s dominant leadership to unveil major fiscal policy changes.

In 1978, then-leader Deng Xiaoping held a meeting to announce market reforms that could put China on a path to rapid economic growth by opening up to the region.

More recently, at the close of a closed-door meeting in 2013, the leadership promised to provide the remote market with a “decisive” role in resource allocation, as well as sweeping changes in economic and social policy.

The government agreed that they needed to free the financial system from state-sponsored financing and instead focus on high-tech innovation and bottom-up expansion around home ownership.

However financial uncertainty is fueling a vicious cycle that has drastically reduced intake.

Some of the most serious problems facing the financial system are the crisis-hit expansion sector, which long served as a major engine for expansion but is now mired in debt, with many major companies undergoing liquidation. Have been.

The government has taken steps in recent months to calm down builders and repair confidence, while also encouraging local governments to buy unsold houses.

NAB senior economist Gerard Berg said the size of the expansion sector has shrunk year-on-year over the past 28 months. Investment in real estate fell 7.4% in May, down 4.7% from a year earlier.

“Conditions in China’s residential property sector remain broadly negative – sales declined 14.3% year-on-year in June, while construction work declined 18.3%,” Berg said.

June retail sales, close to eliminating inflation, were 1.8% higher than the same date in 2023. This was the weakest result since December 2022, which was negatively impacted by the Omicron stream. The surprising end to zero-COVID insurance policies.

“This points to the soft domestic demand conditions that have persisted since the pandemic,” he said.

Analysts say much more is needed for an overall recovery, as the country’s economy has yet to bounce back more than 18 months after dangerous COVID-19 restrictions ended.

Agence France-Presse contributed to this document