China’s economic growth slowed in Q2, signaling need for more stimulus

China’s economy grew 4.7% in the second quarter, in the slowest pace of growth since Q1 2023, against 5.3% expansion in the first three months of 2024 and missing expectations for 5.1% growth.

Much slower than expected growth of the world’s second-largest economy in in April-June period, was mainly caused by prolonged property downturn and job insecurity, which threaten to further hurt a fragile recovery and keep in play expectations for even more stimulus from the government.

Weaker than expected GDP data warn of more challenges China may face on the way towards 5% growth target.

Consumer sector was hit the most, with retail sales growth holding near 18-month low, as deflationary pressures forced businesses to slash prices on everything from cars to food to clothes, with growing signals that buyers are on the way towards reduction of purchases to the basics.

A multi-year property crisis deepened in June as new home prices fell at the fastest pace in nine years, hurting consumer confidence and limiting ability  of debt-burdened local governments to generate fresh funds through land sales. 

Economists expect cutting debt and boosting confidence to be the main focus of a key economic leadership meeting in Beijing this week, although solving one of those problems may make it difficult to fix another.