Quick Bite | China Slows Down

China’s gross domestic product (GDP) grew 4.7% year-over-year in the second quarter, falling below economist expectations of 5.0%. The 2Q rise was smaller than the 5.3% growth recorded in the first quarter, with the figure representing a sharp slowdown in the economy as a prolonged real estate slump and trade tensions continue to weigh.

Industrial production beat expectations, growing 5.3% in June, while retail sales rose just 2% in the same month, missing expectations by a wide margin. Fixed-asset investment was up 3.9% in the first half of 2024.

The slowdown will put pressure on Beijing to boost the economy as leader Xi Jinping and the Communist Party’s top officials gather for a twice-a-decade meeting to discuss economic reforms.

Much of China’s growth in 2Q continued to be driven by manufacturing and Beijing’s push to sell products with cutting-edge technology, including electric vehicles (EVs). That focus, however, has led Western countries to push back, with officials including US Treasury Secretary Janet Yellen accusing China of creating excess capacity.

The data release came as the Chinese Communist Party’s Central Committee on the 15^{th of} July 2024 launched its third plenum, a four-day meeting in which the country’s leadership is expected to set the direction of its long-term social and economic policies. The last major event was held 5 years ago in 2018.

Beijing has pushed to upgrade its manufacturing sector as part of a long-term shift towards emphasising “high-quality development” in areas such as electric vehicles and artificial intelligence.

US President Joe Biden in May imposed sweeping tariffs on a large swath of Chinese imports, from steel to semiconductors and EVs, adding to levies by former President Donald Trump. Trump is expected to further ratchet up tariffs in China if he secures a second term, which is looking increasingly likely.

Source: FT