As China marked its 75th anniversary on October 1, 2024, President Xi Jinping acknowledged the ongoing economic challenges facing the nation, describing the path ahead as 'stormy.' Despite various measures implemented by the government, including interest rate cuts, increased spending, and doubled subsidies for electric vehicles, the economy has struggled to recover from a prolonged downturn. The International Monetary Fund (IMF) projects a modest growth rate of 5% for 2024, declining to 4.5% in 2025 and further to 3.3% by 2029. [7457115e]
In the second quarter of 2024, China's economy grew by 4.7%, down from 5.3% in the first quarter. Industrial production growth also declined from 5.1% to 4.5% between July and August, while unemployment rose to 5.3% in August, up from 5.2% in July. These figures highlight the ongoing struggles within the economy, particularly in the property sector, where investments have plummeted by 10.2% from January to August 2024. [7457115e]
The property sector's decline has been exacerbated by the fallout from the bankruptcy of Evergrande in 2023, which left the company with over $300 billion in debt. Another major player, Country Garden, is also facing financial difficulties with $205 billion in debt. The ongoing challenges in real estate have significantly impacted consumer confidence and overall economic stability. [7457115e]
In response to these economic pressures, Xi's government announced a substantial funding package of 800 billion yuan (approximately $114 billion) aimed at supporting the stock market and the struggling property industry. This announcement followed a Politburo meeting on September 26, where Xi emphasized the need for economic support amid ongoing downturns. [764b9f1a]
However, the effectiveness of these measures remains in question, as the housing market continues to struggle, with home prices falling by 5.7% in August, marking the largest decline in nearly a decade. The government has also faced complications due to import duties imposed by several countries, further straining the economy. For instance, Canada has imposed a 100% tariff on Chinese electric vehicles, while the EU has set tariffs as high as 37.6%. The U.S. has increased its tax rate on imported Chinese EVs to 102.5% in 2024, creating additional hurdles for the industry. [7457115e]
Despite the temporary boost in the stock market following the stimulus measures, analysts warn that structural reforms are necessary for long-term economic stability. Nicholas Spiro, an economist, has pointed out that the unbalanced growth mix complicates efforts to stimulate demand effectively. As China navigates these economic hurdles, the interplay of domestic policies and international trade relations will be crucial in determining the future trajectory of the economy. [0ef9bc8e][05c8822a]
Looking ahead, further policy measures are anticipated in the fourth quarter of 2024, as President Xi's administration is under scrutiny to deliver results amidst these turbulent economic times. [d3a036eb][6ad6d9ee]