China’s economy grew more slowly than hoped in the third quarter. The government is countering this with an economic stimulus package. But is the growth target for this year still achievable?
Economic growth in China continues to cool. As the statistics office in Beijing announced, the second largest economy grew by 4.6 percent in the third quarter compared to the same period last year – and thus 0.1 percentage points less than in the previous quarter. However, the growth was slightly above the expectations of analysts, who had expected an increase of 4.5 percent on average.
As a result of the ongoing economic weakness, China’s government announced an economic stimulus package at the end of September. However, it failed to provide important details about the extent to which additional debt would be taken on, which could also be used to boost consumption. The initial euphoria on the stock markets then subsided.
The ongoing crisis in the real estate sector in particular has recently contributed to economic weakness in China. Because of the uncertainty, consumers prefer to keep their money together, which is weighing on consumption in the second largest economy.
Doubts about the growth target are increasing
“Although the leadership’s measures take the challenges of the economy into account, the stimulus is still cautious given the situation, especially in order to boost consumption,” says economist Max Zenglein from the Merics China Institute in Berlin. Given the challenges posed by the downward pull of the real estate market, the announced measures had more of a stabilizing effect than promoting growth.
There is no sign of a fundamental turnaround in Beijing’s economic policy. “Promoting industrial strength in the tech sector remains a top priority,” says Zenglein. State and party leader Xi Jinping is sticking to the plan to modernize the economy through the technology sector and thus change the basis of growth. The price for this was paid by parts of the middle class who had to subordinate themselves to the strategic objectives of the leadership.
Beijing sees scope for recovery
Despite the announced aid, analysts doubt that Beijing will achieve its growth target of five percent this year. Sheng Laiyun, spokesman for the Beijing Statistics Office, was confident that the target can still be achieved. The pain of structural change continued. Nevertheless, the Chinese economy withstood the pressure and maintained a stable trend.
Sheng also did not rule out further help. “There is still a lot of scope for further measures and the value of the measures already introduced is also very high,” said the spokesman. There are signs that the economy will stabilize and recover in the fourth quarter. Since the beginning of October, electricity consumption and the prices of some production materials have increased. Robust consumption during the holidays surrounding China’s National Day on October 1st also gives cause for hope.
Source: Stern