China's Economic Growth Hits a Snag: Understanding the Impact of Trade Tensions and Real Estate Woes
China’s economic growth has decelerated, reaching 4.8% in the third quarter of 2024, marking its slowest pace in a year amidst escalating trade tensions with the US and ongoing issues in the property market. This downturn is significant, especially compared to earlier annual growth of 5.2% recorded in the previous quarter. The National Bureau of Statistics of China reported that despite challenges, the economy exhibits ”strong resilience and vitality”, with positive momentum attributed to the technology sector and business services.
Tensions with the US heightened when China restricted exports of rare earths, crucial for global electronics production, leading to threats from US President Donald Trump of a potential 100% tariff on Chinese imports. This development occurs just before a meeting of China’s top leaders to discuss the country’s economic blueprint for the next five years.
Despite these pressures, October figures noted an 8.4% increase in exports, benefiting from a previously established trade truce with the US, while imports also saw growth. Key sectors like 3D printing, robotics, and electric vehicles experienced notable performance, with industrial output growing by 6.5% year-on-year. Additionally, the service sector, encompassing IT, consultancy, and logistics, contributed positively to the economy’s overall performance.
However, experts like Sheana Yue from Oxford Economics highlight that domestic spending remains sluggish, prompting the government to invest billions in incentives to stimulate consumer expenditure. Forecasts suggest that growth may not exceed 4.8% for the year unless further government support is enacted.
Compounding these economic challenges is the struggling property sector, which has seen a 13.9% drop in real estate investments up to September. Falling home prices and declining sales have prompted some developers to abandon projects, with the sector’s downturn significantly impacting local governments, which derive substantial income from real estate. Despite government initiatives to stabilize the market, housing continues to drag on China’s economic prospects, compounded by uncertainties stemming from US trade policies. As the nation grapples with these multifaceted issues, real estate remains a critical focus for economic recovery.