growth at the lowest levels for over a year, weighed down by the real estate sector

2024-10-18 02:52:00

China’s National Bureau of Statistics announced that gross domestic product (GDP) grew 4.6% in the third quarter year-on-year.

China posted its weakest quarterly growth in a year and a half on Friday, October 18, despite all-out efforts to stabilize an economy weighed down by slowing consumption and the housing crisis. China’s National Bureau of Statistics announced that gross domestic product (GDP) grew by 4.6 percent in the third quarter year-on-year, showing a “a complicated and difficult external context (…) as well as new problems of internal economic development”.

This exceeds the expectations of experts polled by AFP who on average expected a 4.5% year-on-year increase in Chinese growth for the third quarter. But this is less than the 4.7% of the April-June period, but also the weakest growth since the beginning of 2023, when China was just emerging from the “zero Covid” health policy, which had paralyzed travel, consumption and therefore strangled the economy. activity.

Faced with the slowdown, the authorities are firing on all cylinders: in recent weeks they have announced an explosion of measures to stimulate economic activity, with the aim of reaching the official target “about 5%” increase in GDP for 2024. After a surge in the stock market, fueled by the hope of a great recovery plan, optimism has waned somewhat in the face of promises and policies deemed not strong enough by the markets.

A persistent real estate crisis

The government has assured yes “all trust” in achieving the annual growth target. But many economists believe more direct financial aid is essential to revive activity and restore business confidence. In recent weeks, authorities have unveiled several sets of measures, including reducing interest rates, particularly for existing real estate loans, and easing restrictions on housing purchases.

As part of the latest stimulus, major Chinese banks, including Bank of China, Industrial and Commercial Bank of China and Agricultural Bank of China, announced on Friday that “Interest rates on yuan deposits will be lowered”according to public television CCTV. But observers, analysts and investors appear to expect more, particularly in how China plans to evolve its economy towards a more consumption-oriented model capable of supporting long-term growth.

The main pitfall of the current recovery: the persistent crisis in the real estate sector. The sector has long been one of the engines of Chinese growth, but is now in great difficulty, with indebted builders, unfinished construction and falling prices, even in major cities. The authorities announced in a press conference on Thursday that they will increase credits for unfinished real estate projects to more than 500 billion euros. They also promised to facilitate the renovation of one million homes, a measure intended to stimulate activity in the construction sector.

Let’s tell the truth: the disorder that reigns in China in the real estate sector cannot be resolved with a few speeches and shaky measures. »

Stephen Innes, of SPI Asset Management

But as in the press conferences of recent weeks, all highly anticipated, Thursday’s announcements were often considered insufficient by analysts. “They are still trying to talk without saying anything, placing even more emphasis on stabilizing the real estate sector”Stephen Innes, of SPI Asset Management, indicates in a note. “The further we got into the press conference, the more we saw that the markets were not really enthusiastic” from the announcements, he underlined. And to conclude: “Then, let’s tell the truth: the disorder that reigns in China in the real estate sector cannot be resolved with a few speeches and shaky measures”.

Stimulating demand for housing is one of the authorities’ priorities to ensure a sustainable recovery. Several major Chinese cities such as Beijing, Shanghai (east), Chengdu (southwest) and Tianjin (north) have eased restrictions on property purchases in recent weeks. In a context of job insecurity in China, low household consumption also risks pushing the Asian giant back into deflation. The consumer price index (CPI), the main indicator of inflation, rose 0.4% year-on-year in September, less than expected and a sign of continued weakness in demand.