Image Credits - Bharat Express
President Xi Jinping has emphasized that China’s economic recovery remains in a crucial phase. The country’s second-largest economy saw a modest 4.9% growth in the third quarter, slightly below Beijing’s target of five per cent, reflecting challenges from subdued domestic activity and difficulties in the property sector that are impeding the post-pandemic rebound.
Xi stressed the importance of expediting the establishment a modern industrial system, boosting domestic demand, and managing and averting risks. He also underscored the necessity of enhancing self-reliance in critical science and technology sectors while hastening the implementation of a new development framework. In the third quarter, China’s economy grew by a modest 4.9%, just below Beijing’s low target of 5 per cent.
Despite the removal of strict containment measures at the close of 2022, authorities have encountered challenges in sustaining a recovery from the COVID-19 pandemic’s impact. Officials reported that exports experienced growth in November, marking the first increase in seven months. However, it’s important to note that this improvement is measured against a low baseline from the previous year when the effects of COVID-19 policies were most pronounced. Chinese exports, traditionally a significant contributor to growth, had been on a declining trend since October of the preceding year, with a brief upturn in March and April. Additionally, an unexpected decline in imports for November underscored subdued consumer activity within the domestic market.
Moody’s downgraded China’s credit rating outlook from stable to negative on Tuesday, citing extensive risks to the country’s fiscal, economic, and institutional strength. In response, the finance ministry in Beijing expressed disappointment with Moody’s decision, stating that concerns regarding China’s economy were deemed unnecessary. Concerns have intensified due to challenges in the property sector, which is another conventional driver of economic growth.
China’s expansive real estate sector is currently entangled in a severe debt crisis, with some of the country’s largest developers burdened by debts amounting to hundreds of billions of dollars, putting them at risk of insolvency. This situation has raised alarm among authorities as concerns about debt continue to erode buyer confidence, leading to a sharp decline in home prices. Importantly, the crisis poses a significant threat of contagion to other sectors of the economy.
Construction and real estate collectively contribute to approximately a quarter of China’s gross domestic product (GDP), underscoring the sector’s crucial role in the overall economic landscape. On Thursday, Ting Lu, the chief China economist at the Japanese bank Nomura, emphasized that the challenges in the property market remain “the single largest drag affecting China’s economy.” The deepening troubles in real estate impact the sector directly and have broader implications for the country’s economic health, making it a pivotal issue demanding attention and resolution.