With China striving to revive development within increasingly difficult economic conditions, its economy grew in the third quarter of 2023 at its slowest pace since early last year. According to the National Bureau of Statistics, the three months preceding September’s conclusion saw a 4.6% year-on-year increase in GDP. This number falls short of the government’s aspirational “around 5%” annual growth target and last quarter’s performance.
Although the data presents a depressing picture of China’s economic situation, it nonetheless exceeded analyst projections; further data—such as those on retail sales and manufacturing output—offers some encouraging surprises by exceeding projections.
Can China Still Meet Its Growth Targets for 2023?
China’s government has entered its second consecutive quarter in which economic growth has trailed behind the annual objective of 5%, raising questions about whether the year’s end will allow the goal to be reached.
One analyst cautioned that “the government’s growth target for this year now appears in serious jeopardy,” stressing that “it will take a significant stimulus-driven boost to growth in the fourth quarter to hit the target.” Without a notable increase in the fourth quarter, “it will be difficult.”
Some have a negative view, yet others still see hope. An economist voiced hope that Beijing’s recently implemented stimulus policies will have an impact. “The stimulus measures are probably going to drive the economy to its around 5% target for the year,” the analyst remarked. He nonetheless advised that “more is required if officials are to address the structural challenges in the economy.”
How Is the Property Market Affecting China's Growth?
The continuous crisis in China’s property industry is one of the most urgent issues undermining her economy. According to figures, September’s new home prices dropped the fastest in almost ten years. Most people agree that this recession seriously hinders the recovery of the nation’s economy.
“The property market understandably remains the biggest drag on China’s growth,” said a leading economist for the greater China area of a prominent banking institution. They said, “New investment is unlikely to see a substantive recovery until prices stabilize and housing inventories decline… until then, property will remain a notable headwind to growth.”
Given that real estate investments and property development account for a sizable share of China’s GDP, a continuous downturn in this industry risks aggravating more sluggish attempts at general economic recovery. Policymakers find it challenging to balance general economic growth and the housing market’s stability.
What Measures Is Beijing Taking to Support Growth?
China’s central bank, the People’s Bank of China (PBOC), has increased initiatives to boost the economy and offset the slowing. The PBOC called a conference on Friday to encourage banks and other financial institutions to boost lending to help development.
The PBOC revealed its most major stimulus plan last month since the epidemic, including dramatic interest rate and mortgage rate cuts. The strategy also demanded that banks provide more credit to companies and people and aimed to strengthen the declining stock market.
Since then, the Ministry of Finance and several other government departments have presented further ideas to strengthen the economy. These steps have aimed to solve longer-term structural problems influencing growth and temporary concerns, including low consumer and corporate confidence.
What Are the Structural Challenges Facing China's Economy?
Although the most recent numbers for manufacturing output and retail sales give some optimism for recovery, most agree that more needs to be done to address China’s fundamental problems. Weak consumer demand, poor corporate confidence, and a declining property market have left the second-largest economy in the world at a crossroads.
China’s continuous property crisis directly affects economic development and has a domino effect on other sectors such as finance, manufacturing, and building. Economists concur that reaching continuous growth will prove challenging until the property market stabilizes.
“The stimulus measures are a step in the right direction,” one economist said, “but addressing the deeper, structural issues will require more than just temporary fixes.”
What Does the Future Hold for China's Economy?
With just a few months left in the year, the focus is on whether China can mobilize its economy sufficiently to reach its annual growth objective. Although the administration has been aggressive in proposing fresh stimulus plans, whether these steps will overcome several challenges remains to be seen.
“Without a strong rebound in the final quarter, it’s hard to see how the government’s growth target can be met,” an economist said.
Ultimately, much depends on whether consumer confidence recovers, credit rises, and the property market stabilizes. Without these essential changes, China would end the year with a lower-than-expected growth rate that would have broad consequences for the world economy.
