Despite the lifting of Covid restrictions at the end of 2022, the Chinese economy continues to show signs of sluggish growth. The economy expanded at an annual rate of 4.6% in the third quarter of 2024, falling short of the official target of “about 5%.” The weak performance was attributed to low consumer confidence and a struggling property market.
In response to the slow growth, Chinese policymakers have announced various measures aimed at boosting the economy, such as reducing mortgage rates for existing homes and allowing banks to lend more by reducing reserve requirements. However, analysts believe that more aggressive stimulus plans are needed to provide a significant boost to the economy.
Despite improvements in retail sales and industrial output, the housing market remains a concern with sales volumes declining and home prices continuing to drop. Measures announced by the government, such as increasing financing for approved housing projects, are unlikely to drive a significant turnaround in the sector and broader economic activity.
Recently, China’s state-run banks have cut their deposit rates and the central bank issued guidelines for providing loans to companies and major shareholders for stock repurchases in an effort to stabilize the share markets. These moves have driven a rally in Shanghai and Shenzhen markets, but investors remain cautious as they await more substantial government spending initiatives to support the economy.
Overall, China’s economy continues to face challenges despite efforts to stimulate growth, and analysts warn of a potential slowdown by the end of next year if more aggressive measures are not put in place.
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