China’s GDP growth rate falls short of targets as property sector struggles, Fitch downgrades outlook

Beijing had set an annual growth target of around 5% for 2024, but the first quarter did not meet expectations. Official data showed that China’s gross domestic product (GDP) had expanded by only 4.6% compared to the previous year, falling short of predictions of a 5.3% growth rate.

The property sector, which accounts for around 20% of GDP, has been particularly challenging. First quarter retail sales growth fell to 3.1%, indicating a decline in consumer confidence. Property investment dropped by 9.5% during the same period, highlighting the difficulties faced by real estate firms in the country.

Recent data showed that new home prices fell at the fastest rate in over eight years in March, with major property developers like Evergrande, Country Garden, and Shimao facing challenges. Some were even ordered to liquidate by courts.

In light of these economic challenges, credit ratings agency Fitch recently downgraded its outlook for China. At the annual gathering of China’s leaders in March, officials announced that the economy had grown by only 5.2% in 2023, far below the target set for the year. While China’s economy has historically seen rapid growth, with an average annual GDP growth of nearly 10%, it now faces a range of challenges that could impact its future trajectory.

Despite these challenges, analysts suggest that for China to achieve its growth target it will need to see increased household spending on goods and services as well as more investments in infrastructure projects such as roads and bridges.

China’s government is taking measures to support economic stability such as increasing spending on infrastructure projects and implementing policies aimed at stimulating demand from consumers.

The ongoing property market crisis in China has significant implications for the economy as it accounts for around 20% of GDP and has led to decreased consumer confidence and property investment drops.

Overall, while China’s economy continues to face challenges in various sectors such as real estate and consumer confidence, with sustained efforts from both government and private sectors it can still achieve its growth targets while ensuring long term stability and sustainability.