China’s Economic Growth Slows To 18-Month Low Amid Fading Stimulus Optimism

China has posted its slowest economic growth in a year and a half, as ongoing struggles in the property sector and weak consumer spending hamper recovery efforts. On Friday, the National Bureau of Statistics (NBS) announced that the economy expanded by 4.6% year-on-year in the third quarter of 2024, a slight dip from the 4.7% growth recorded in the previous quarter.

This marks the slowest growth since early 2023, when the country began emerging from its pandemic-related lockdowns.

In recent weeks, Beijing has rolled out a series of economic measures aimed at reinvigorating the world’s second-largest economy. Despite these efforts, which included interest rate cuts and eased restrictions on home-buying, optimism surrounding a potential large-scale stimulus has faded.

Investors had initially hoped for what was being referred to as a “bazooka stimulus,” but the lack of specific details or major financial pledges has dampened market expectations.

While the 4.6% growth figure slightly exceeded analysts’ predictions of 4.5%, the overall outlook remains grim. Domestic spending remains weak, with consumers cautious about the economic climate. The September consumer price index, a key inflation measure, fell short of expectations, further signaling tepid demand and raising concerns of potential deflation.

Property Sector Woes Continue

One of China’s largest challenges has been the ongoing crisis in the property sector, a vital driver of the nation’s economic growth for years. The sector is currently grappling with significant debt, which has resulted in stalled housing projects and weak investment.

On Thursday, Chinese officials announced plans to inject over $500 billion into credit for unfinished housing developments and to fund the renovation of a million homes. However, much like previous announcements, this latest move failed to excite investors, with the market craving more concrete and ambitious financial commitments.

The property crisis is a major stumbling block for China’s economic revival, and experts are skeptical about whether the measures announced so far will be enough to address the deep-rooted issues. “China’s property mess isn’t something that can be patched up with a few speeches and half-baked measures,” remarked Stephen Innes, managing partner at SPI Asset Management, in a recent note.

Need For Clearer Fiscal Stimulus

Economists are calling for more direct fiscal intervention to spur growth and restore business confidence. While Beijing remains publicly confident in achieving its annual growth target of 5%, many believe that without significant fiscal stimulus, the goal could remain out of reach.

Adding to the uncertainty is the potential impact of external factors, such as the outcome of the U.S. elections, which some analysts believe could influence Beijing’s policy decisions. Meanwhile, China’s top banks have cut interest rates on yuan deposits for the second time this year, signaling further attempts to inject liquidity into the economy.

Outlook And Investor Sentiment

As China works to shift its economy towards a consumption-driven model for sustainable long-term growth, pressure is mounting on Beijing to deliver more robust economic solutions. Investors, meanwhile, are growing impatient with the lack of specifics on how the government plans to tackle its most pressing issues.

The prolonged economic slowdown, coupled with unresolved property sector problems, leaves China at a critical juncture. Although Beijing has expressed confidence in its ability to meet growth targets, without bolder actions, the optimism that once surrounded the possibility of economic recovery may continue to wane.

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