China posts slowest growth in over a year as property issues hang

China says its economy grew 4.6 percent year-on-year in the third quarter of 2024, the slowest pace recorded in one and a half years. | MICHAEL ZHANG / AFPTV / Agence France-Presse

BEIJING— China posted its slowest growth in a year and a half on Friday as authorities come under pressure to follow up a recent slew of stimulus with more action to reignite the world’s number two economy.

Authorities have since last month unveiled a raft of measures to kickstart sluggish consumption and address a prolonged and debilitating debt crisis in the country’s colossal property sector.

After a blistering market rally fueled by hopes for a long-awaited “bazooka stimulus,” optimism has tapered as authorities refrained from providing a specific figure for the bailout or detailing any of the pledges.

On Friday, Beijing’s National Bureau of Statistics (NBS) said the economy expanded 4.6 percent year on year in the third quarter, down from 4.7 in the previous three months and the slowest since early 2023, when China was emerging from its strict zero-COVID policy.

However, it was slightly better than the 4.5 percent predicted by analysts surveyed by Agence France-Presse.

The NBS on Friday acknowledged a “complicated and severe external environment… as well as new problems of domestic economic development”, describing China’s economic performance in the first three quarters as “generally stable.”

Still, NBS figures showing a forecast-beating rise in September retail sales – a gauge of consumer activity – provided a ray of light after a string of below-par readings on a range of indicators including inflation, investment and trade.

READ: China expected to post slowing growth as economic woes drag

And ahead of the data, state media said the country’s top banks had cut interest rates on yuan deposits for the second time this year as part of a move to boost lending.

Beijing has said it has “full confidence” in achieving its annual growth goal of five percent, but economists say more direct fiscal stimulus is needed to revive activity and restore business confidence.

Recent weeks have seen authorities unveil a raft of measures to funnel cash into the economy including a string of rate cuts and loosened restrictions on home-buying.

But investors are clamoring for more specifics on how Beijing will shift its economy towards a consumption-driven model that can sustain long-term growth, and away from one based on government investment.

China fiscal supports ‘still unclear’

The recent raft of announcements – which included a hint at raising the government debt ceiling and measures to support indebted local governments – are a move “in the right direction,” said Benson Wu, China and Korea economist at Bank of America Global Research.

“That said, the size and the form of fiscal supports are still unclear,” Wu told Agence France-Presse.

“More still needs to be clarified before we can have a thorough assessment on the effectiveness of the policies.”

One major headache facing the economy has been a prolonged crisis in the property sector, which has long been a key driver of growth but is now mired in a sea of debt.

Prices of new homes in September only increased on an annual basis in two out of 70 large and medium-sized cities surveyed by statistics authorities.

On Thursday, officials said they would boost credit available for unfinished housing projects to more than $500 billion and pledged to renovate a million homes, a move intended to boost activity in the property sector.

READ: China unveils fresh stimulus to boost ailing economy

But as with a stream of much-touted briefings in the past week, Thursday’s news conference failed to impress with its lack of big-ticket financial pledges.

The latest figures on GDP mean Beijing’s goal of a five percent expansion in 2024 will be “difficult to achieve if this trend continues to year end,” said Zhang Zhiwei, President and Chief Economist at Pinpoint Asset Management.

“We are waiting on more clarity on the fiscal stimulus,” said Zhang in a note.

“We may have to wait till November to find out details, as the outcome of the US election is probably one factor that influences the policy thinking in Beijing,” he added.

A number of major cities have in recent months eased house-buying restrictions – this week in Chengdu, the capital of southwestern province of Sichuan and the northern port city of Tianjin.

China’s economic growth is also being hindered by sluggish domestic spending, with consumer wariness threatening to plunge the country into deflation.

The September consumer price index – a key measure of inflation – missed expectations, speaking to continued lackluster demand.