China’s Economic Growth: A Comedy of Errors?
Ah, China’s economy! It’s like watching a romantic comedy where the boy meets girl but then fumbles the proposal because he’s too busy counting GDP growth percentages. This week, the National Bureau of Statistics (NBS) announced that China’s GDP posted a modest growth of 4.6% in the third quarter. That’s like achieving a “B” in a class you didn’t prepare for – not quite the A+ you daydreamed about but still better than a complete fail!
What’s That? A “Complicated” Narrative?
Yes, the officials are throwing around terms like “complicated and difficult external environment”. Have you ever met someone who speaks like that? You know they’re hiding something! This growth is a whisper below the expert prediction of 4.5%, and, like a bad haircut, it seems to show that GDP growth is slowly fading out since it peaked at 4.7% last quarter. At least they’re not under zero Covid restrictions anymore – that would have sent this figure plummeting faster than a lead balloon at a children’s party!
Hooray for Retail Sales… Sort Of
Now, hold on to your hats (or cash), because there’s a tiny bit of good news! Retail sales ticked up by 3.2% in September. That’s fantastic if you’re a fan of spreadsheets and mild excitement! But given the slightly disappointing charting of inflation and investment, that’s a bit like finding a 5p coin under your sofa cushions when you’re expecting a gold nugget.
Measures to Stimulate Activity – A Game of Financial Jenga
China is pulling out all the financial stops, throwing interest rate reductions at us like confetti at a wedding. They’re even loosening restrictions on housing purchases—like a parent allowing their kid on a sugar rush to run a few laps around the house! However, this has left some economists scratching their heads and wondering: will these measures really get China out of its economic rut?
Real Estate: The Uninvited Guest
Now, in typical soap opera fashion, lurking in the background is the real estate crisis. It’s been the star of the show for years, and now it’s flopping with piles of debt and unfinished buildings that look like they’ve lost the will to live. There are only two cities where housing prices have increased this autumn—one of them may well be populated exclusively by bears and other woodland creatures!
Political Punchlines and Customs Duties
Meanwhile, the US election looms over Beijing like a bad smell after a meal of questionable takeout. Trump is wagging his finger and threatening tariffs that wouldn’t just put a dent in trade, they’d sink it faster than a Titanic tribute show! Economists are starting to wonder whether they should prepare for a silent apocalypse if these tariffs come into play—I mean, who wants to order a rubber duck when the price has gone up by 60%?
“We may have to wait until November to know more, as the US election outcome is likely one of the factors influencing policy thinking in Beijing,” says analyst Zhang Zhiwei.
A Silver Lining?
So what does this all mean? The government’s got confidence, and we all know confidence is just a fancy word for wishful thinking! But unless they can tweak a few things, that target of around 5% growth for 2024 might just have to be placed on a “wish list” next to world peace and a selfie with a unicorn.
In summary, the numbers may be rebounding (a bit) and the government is putting out feelers (and funds!), but can we trust this growth? Or is it a brilliant act of economic ventriloquism, with lots of smoke and mirrors but little substance? Grab your popcorn, folks, because this economic drama promises to keep us glued to our screens for months to come!
In China, the National Bureau of Statistics (NBS) announced that gross domestic product (GDP) grew by 4.6% in the third quarter year-on-year, reporting a “ complicated and difficult external environment (…), as well as new problems of internal economic development ».
This figure, however, slightly exceeds the expectations of experts interviewed by AFP, who expected on average +4.5%. It nevertheless remains below the +4.7% of the April-June period, and above all represents the weakest growth since the start of 2023, when China was barely coming out of its health policy. zero Covid », which had paralyzed travel and consumption, and therefore strangled economic activity.
China: new round of measures to revive the economy
An encouraging sign, however: retail sales, the main indicator of household consumption, rebounded over one year in September (+3.2%), after only +2.1% in August. They bring a glimmer of hope after disappointing indicators in terms of inflation, investment and trade.
Measures to revive activity
Faced with the economic slowdown, the authorities have been pulling out all the stops in recent weeks. They announced bursts of measures to stimulate activity, with the aim in particular of achieving the official objective “ about 5% » growth for 2024. Among these announcements, interest rate reductions, particularly for existing property loans, as well as relaxations of restrictions on the purchase of housing.
Thus, major Chinese banks including Bank of China, the Industrial and Commercial Bank of China, and the Agricultural Bank of China, reduced interest rates on yuan deposits this Friday, for the second time this year, according to state media. The government assured that it had “ all confidence » in achieving the annual growth objective. But observers, analysts and investors seem to be expecting more, in particular more direct financial aid to revive activity.
In the South China Sea, the battle for submarine cables
The recent burst of announcements is a step “ in the right direction », Tells AFP Benson Wu, economist specializing in China at Bank of America Global Research. “ That said, the scale and form of financial aid are not yet clear », he notes. “ There are still points to be clarified before a detailed assessment of the effectiveness of these policies can be carried out. ».
A crisis in real estate that persists
But the current recovery is mainly hampered by the persistent crisis in real estate. Long the engine of Chinese growth, the sector is today in great difficulty, with indebted developers, unfinished construction and falling prices, even in large cities. In September, new housing prices increased year-on-year in only two of the 70 large and medium-sized cities analyzed, the BNS said on Friday.
Faced with a “silent” crisis, China is purging its regional banks
On Thursday, the authorities announced that they would increase credits intended for unfinished real estate projects to more than 500 billion euros. They also promised to facilitate the renovation of one million homes – a measure also intended to stimulate activity in the construction sector. Several large Chinese cities such as Beijing, Shanghai (east) and Tianjin (north) have also relaxed their restrictions on the purchase of real estate in recent weeks.
But in a context of job insecurity, low consumption also risks pushing China back into deflation. The consumer price index (CPI), the main gauge of inflation, increased by 0.4% in September year-on-year, less than expected and a sign of persistent weakness in demand.
Uncertainty around the American election
The GDP figure announced on Friday means that Beijing’s target of growth of around 5% in 2024 will be ” difficult to reach » unless there is a reversal of the trend by the end of the year, noted analyst Zhang Zhiwei of Pinpoint Asset Management in a note.
« We may have to wait until November to know more, as the US election outcome is likely one of the factors influencing policy thinking in Beijing “, he added.
Especially since Trump, the Republican candidate, has already announced at least 10% customs duties on all imports, and even up to 60% on those coming from China, if he is elected. If the customs duties desired by Trump are implemented, trade between the United States and China could be reduced by 70%, with the redirection or disappearance of hundreds of billions of dollars of trade.
Customs duties: China launches its response against European spirits
Those implemented in 2018 resulted in a redirection of Chinese exports to other markets, causing “ additional protectionist pressures in countries receiving more cheap Chinese goods », a souligné Adam Slater, d’Oxford Economics.
Nevertheless, elected Democrats and Republicans alike defend a tough commercial line of conduct towards Beijing. Indeed, Democratic President Joe Biden maintained, and even strengthened, the customs duties imposed by former President Trump, which affected some $300 billion in goods from China. It is therefore very likely that Kamala Harris, the Democratic candidate, will continue in the same direction as her predecessor.
(With AFP)
