China’s economic growth slowed in Q2, highlighting the need for additional stimulus measures

China’s economy grew by 4.7% in the second quarter, marking the slowest pace of growth since Q1 2023. This is a decline from the 5.3% expansion in the first three months of 2024 and falls short of the expected 5.1% growth.

The much slower-than-expected growth in the world’s second-largest economy during the April-June period was primarily due to a prolonged property downturn and job insecurity. These factors threaten to further weaken a fragile recovery and maintain expectations for additional government stimulus.

The weaker-than-expected GDP data highlight the challenges China may face in achieving its 5% growth target.

The consumer sector was the hardest hit, with retail sales growth near an 18-month low. Deflationary pressures forced businesses to slash prices on everything from cars to food to clothing, signaling that consumers are likely to reduce their purchases to essentials.

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

Economists expect that cutting debt and boosting confidence will be the main focus of a key economic leadership meeting in Beijing this week, although addressing one of these issues may complicate efforts to resolve the other.