An already struggling Chinese economy is reportedly sinking even further ahead of a high-level Chinese Communist Party (CCP) meeting this week to address challenges.
China’s economy lost momentum in the second quarter of 2024, with overall gross domestic product (GDP) expansion falling below expectations, The Wall Street Journal reported on Monday. Economic struggles have plagued China in recent years, with high costs and unemployment burdening the country’s citizens, even as the government has tried several methods to prop up domestic and foreign confidence.
As the world’s second-largest economy, China is deeply intertwined with the U.S. economy, which imported over $448 billion worth of goods from China in 2023 compared to only $195 billion in exports, according to The Council on Foreign Relations. China’s slow economy poses risks to U.S. and global stock markets and could potentially bleed the overall U.S. GDP, according to U.S. Bank and The New York Times.
“This is a point in time where China needs to show its cards,” Bert Hofman, former World Bank country director for China, told the Times on Monday.
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China’s GDP expanded by 4.7% in the second quarter of 2024 compared to the same time last year, according to the WSJ. That’s lower than the 5.3% GDP growth that was recorded in the first quarter of the year and short of the 5% predictions from some economists.
GDP growth was equally dismal on a quarter-to-quarter basis, with only 0.7% growth compared to 1.5% last quarter, according to the WSJ. Poor consumer spending and a worsening property and real estate sector contributed to the stalled growth.
Chinese President Xi Jinping and top officials from the CCP will gather this week to discuss options and potential solutions, according to multiple reports. But the meetings will focus more on long-term reforms rather than short-term options, as officials are likely to avoid injecting a stimulus that would potentially balloon inflation, according to the WSJ.
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“These data will heighten the clamor for stimulus measures as well as broader reforms, with both short-term and longer-term policy measures likely to be needed to overcome China’s economic malaise,” Eswar Prasad, professor of trade policy at Cornell University and former head of the International Monetary Fund’s China division, told the WSJ.
Li Qiung, who holds one of the most powerful positions in the CCP, said in June that the government would use “strong medicine” to address the country’s economic problems, according to the WSJ. China should instead “precisely adjust and slowly nurture [the economy] to allow it to gradually recover,” Li said.
Any measures adopted at China’s economic conference this week may take time to take effect, according to the WSJ. It would likely take short-term reforms to help the country meet its goal of 5% overall growth for the year.
(Featured image credit: State Department Photo/Public Domain)
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