China, the world’s second-largest economy, continued to struggle for traction over the second quarter of 2024. Soft domestic demand and a weak property market continue to weigh on economic activity. Market participants are calling on the government to implement measures that might help improve domestic spending.
- China’s economy grew by 4.7% year-over-year in the second quarter of 2024, slowing from the 5.3% expansion in the first quarter. This marked the slowest pace of growth since the first quarter of 2023, and missed economists’ expectations, based on a survey of economists by Bloomberg.
- China’s economy struggled amid relatively weak domestic demand. While the government and People’s Bank of China (PBOC) have taken steps to help bolster consumer confidence, it has done little to improve consumer spending. It was also reported that retail sales rose by 2.0% year-over-year in June, marking the slowest pace of growth since December 2022.
- The government has implemented measures to help boost production. This was reflected in a 5.3% year-over-year increase in industrial production in June compared to the same month in the previous year. This helped lift exports over the quarter, positively contributing to growth.
- Markets are hoping the government will take concrete steps to stimulate domestic demand. This could be crucial as the potential for increased tariffs on China’s exports from major partners looms, particularly with a potential change in policymakers in the US, which could pull down foreign demand for China’s goods and services.
A robust Chinese economy is crucial for the overall health of the global economy. While the government could step in to boost domestic demand, help from the PBOC might be limited. There is growing concern that more stimulus measures from China’s central bank could weaken the yuan and negatively impact China’s financial markets in response to capital outflows.
If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.