Slow growth in China raises doubts over 2024 target as concern mounts

Economic growth in China has slowed to the lowest level in six quarters, according to the data reported last week by the National Bureau of Statistics. Between July and September, the economy grew only 4.6 per cent year-on-year. While this is in line with, or only marginally below, most estimates, it does cast into question whether the country will achieve the 2024 annual growth target, which has been set at “around 5 per cent”. Given the degree of support — or, at least, rhetorical commitment — that the leadership and Beijing have attached to this target in recent months, it will be interesting to see whether further measures to prop up growth are planned. It is worth noting that some stimulus measures have already been released over the past weeks. For one, the People’s Bank of China (PBoC) cut mortgage rates, and the National Development and Reform Commission — the chief central policymaking body — advanced 100 billion yuan from the 2025 Budget to be spent this year. The country’s finance ministry had also announced a few policy initiatives that were meant to address one of the key sectoral bottlenecks: China’s interlinked real estate market and local government debt.
 

In overall terms, the financing set aside is not sufficient to paper over structural problems. This has been largely understood already, but the growth numbers have served to pop a bubble of enthusiasm in the markets that had surrounded the mere announcement of a stimulus. China faces headwinds in various sources of demand, in particular — and the government has not opened its purse strings sufficiently to make up for the shortfall. While retail sales rose 3.2 per cent this September year-on-year, up from 2.1 per cent in August, other indicators, including the consumer price inflation rate in the same month, suggest subdued consumer demand. Beijing needs consumers to start buying more if the economy is to rebalance away from troubled sectors.
Meanwhile, exports grew only 2.4 per cent year-on-year in September, down sharply from 8.7 per cent in August. The prospects for export are also troubled, especially if Donald Trump manages to find his way back to the White House following elections in the United States next month. Mr Trump has been talking about “400 per cent” tariff rates and also saying tariff is “the most beautiful word in the dictionary” and his “favourite word”.
 

While it is possible that Beijing might be able to push full-year growth up to its target, the fact is that policymakers are worried — and they should be. The PBoC responded to the growth numbers within a few minutes by announcing measures to support share prices. The political concern here was clearly to avoid a damaging reversal of recent historic rises in the markets. Large firms and funds have been given access to PBoC liquidity so they can buy back shares and the central bank governor has promised additional “counter-cyclical” measures. But investors will now be looking to see if a broader focus on structural reform, rather than stop-gap measures, is evident. Premier Li Qiang at a State Council study group session recently called for reforming the barriers to internal trade and creating a genuinely national market. Steps in that direction would help revive flagging enthusiasm about the China story.