The Chinese economy began 2024 with unexpected strength, posting a 5.3% growth in GDP in the first quarter. This surpassed predictions of a 4.6% growth rate, despite difficulties in the property sector. In March, Beijing had set a growth target of approximately 5% for the year.
Although retail sales growth fell to 3.1% in the first quarter, indicating a decline in consumer confidence, analysts believe that households will need to contribute more to the economy for China to achieve its growth target. Property investment decreased by 9.5% during this period, reflecting the struggles faced by real estate firms in China.
The ongoing property market crisis has had a significant impact on the Chinese economy, with the sector accounting for around 20% of GDP. In March, new home prices experienced their fastest decline in over eight years. High-profile property developers such as Evergrande have faced liquidation orders and winding-up petitions in Hong Kong.
Fitch recently downgraded its outlook for China due to increasing financial risks and economic challenges. Despite these challenges, China’s leaders reported a 5.2% growth rate for 2023 at their annual gathering in March. The Chinese economy has historically maintained high growth rates, with an average annual GDP growth rate of close to 10% over several decades.
In conclusion, while China’s economy started off stronger than expected, there are still challenges facing it, particularly in the property sector and consumer confidence levels are declining slowly but steadily as time passes by.