China's Q2 growth misses expectation, prompts urgent economic policy review

China's economic growth in the second quarter fell short of expectations at 4.7%, with weak consumption and property data prompting policymakers to convene a key economic meeting

China's economic growth in the second quarter failed to meet market expectations, with weak consumption and property data highlighting ongoing challenges, according to a report by the Hong Kong-based newspaper South China Morning Post (SCMP).

The latest economic data has prompted policymakers to convene a key economic meeting in Beijing on Monday to address the concurrent issues.

The National Bureau of Statistics (NBS) reported on Monday that the world's second-largest economy grew by 4.7 per cent in the second quarter compared to a year earlier. This was below the 5.08 per cent growth predicted by economists polled by Chinese financial data provider Wind and down from the 5.3 per cent growth in the first quarter. For the first half of the year, China's gross domestic product grew by 5 per cent year on year.

 

China's economy saw a quarter-on-quarter growth of 0.7 per cent in the second quarter, a decline from the 1.6 per cent growth in the previous quarter. The NBS said on Monday that the external environment remains complex, and domestic demand is still insufficient, indicating a need to strengthen the foundation for economic recovery.

Meanwhile, retail sales in China increased by 2 per cent in June compared to the previous year, down from 3.7 per cent growth in May. Industrial output rose by 5.3 per cent last month year on year, slightly less than the 5.6 per cent growth seen in May.

Overall fixed-asset investment grew by 3.9 per cent in the first five months of 2024 year on year, compared to a 4 per cent gain in the January-May period. Private investment showed a marginal increase of 0.1 per cent in the first half of the year. However, property investment declined by 10.1 per cent in June year on year, consistent with the fall observed in May.

Unemployment rate in China remains steady

China's urban unemployment rate remained steady at 5 per cent in June, unchanged from May. Despite increasing trade frictions and domestic challenges in the property and job markets, Beijing has set an annual economic growth target of around 5 per cent. Multiple domestic and international economic institutions predict that this target is likely to be met.

The report noted that China's economy is experiencing a broad deceleration due to weak consumer and business sentiment, which is exacerbating the challenges. It mentioned that while the property sector is anticipated to remain sluggish, the further slowdown in retail sales and fixed-asset investment is concerning, especially with the ongoing disinflationary pressure.

Experts also warned that without a shift towards demand-side policies, China might not achieve its 5 per cent annual growth target. However, they suggested that the poor economic data might eventually provide a justification for changing the economic course, SCMP added.

The economic data was released on the same day China commenced its long-awaited third plenum (an assembly of all the members of a group or committee), where the highest policy-making body is expected to set the economic strategy for the next five to ten years.