In brief
As the world’s second-largest economy confronts challenges, analysts predict the need for further stimulus to invigorate growth.
China's economy has shown signs of deepening stagnation as its gross domestic product (GDP) expanded by only 4.6% in the third quarter of this year, marking the slowest growth since early 2022. According to the National Bureau of Statistics, this growth rate fails to meet the government's target of "around 5%" for the year and reflects a decline from the previous quarter's performance. However, these figures did exceed some analysts' expectations, and other indicators released recently, such as retail sales and factory output, offered a slightly more positive picture.In response to these worrying trends, the Chinese government has rolled out a series of measures aimed at stimulating economic activity. Yet, this marks the second consecutive quarter where growth has lagged behind the targeted percentage, posing significant challenges for policy-makers. Eswar Prasad, the former head of the International Monetary Fund's China division, pointed out the precarious situation, noting that without substantial stimulus in the fourth quarter, reaching the annual growth goal seems increasingly unlikely.Conversely, Moody's economist Harry Murphy Cruise expressed a more optimistic viewpoint, suggesting that the existing stimulus could indeed help the economy meet the government's target. He warned, however, that additional efforts are essential to tackle the underlying structural issues.Adding to the economic woes, new data showed that home prices in China experienced their sharpest decline in nearly a decade in September, further exacerbating the ongoing property sector crisis. Lynn Song, chief economist for Greater China at ING, remarked that the property market remains a significant obstacle to growth, with a recovery unlikely until prices stabilize and inventory levels decrease.To counteract these challenges, China’s central bank recently called on financial institutions to increase lending to businesses and consumers. Last month, the People's Bank of China (PBOC) unveiled the most extensive stimulus package since the onset of the pandemic, which included substantial cuts to interest and mortgage rates, as well as initiatives aimed at revitalizing the stagnant stock market.Navigating through a complex environment marked by a property crisis and diminished consumer confidence, China's economy faces a crucial junction as it seeks to rebound amidst growing economic uncertainties. As the nation moves closer to its 75th anniversary, the question remains whether President Xi Jinping can orchestrate a turnaround that stabilizes and grows the economy.
