Mumbai: The Chinese economy made a soft rebound in the third quarter of 2024, with a growth rate of 4.6 per cent. This exceeded projections slightly, as the stimulus package introduced by the government helped cut down housing prices and tax rates for Chinese citizens, sparking public confidence. The National Bureau of Statistics reported this as a positive sign for the world’s second-largest economy, despite lingering challenges.
China’s industrial production also showed signs of recovery, while retail sales saw a rise, further cementing hopes of sustained growth. However, the growth rate in Q3, although positive, was still lower than the previous quarter’s numbers. The economy expanded by 0.9 per cent, a slight improvement from the 0.7 per cent expansion seen in Q2.
The Impact of the Stimulus Package
At the beginning of the third quarter, the Chinese government introduced a stimulus package aimed at reviving the economy, which had been suffering from high housing costs, soaring taxes, and a rising cost of living. Public spending had significantly decreased, and widespread youth unemployment further dampened the economy. The country’s shrinking population and ageing demographic presented additional challenges, threatening the resilience of China’s key markets.
Despite these headwinds, the stimulus package helped stir the economy by reducing housing prices and tax burdens, while also providing welfare packages to unemployed graduates. These measures were crucial in boosting consumer confidence, allowing the public to spend more on goods and services.
A Positive Growth Rate Despite Challenges
Though China faces significant structural issues, it managed to register a 4.6 per cent growth rate in Q3 2024. Experts remain cautious, as China’s rapid growth over the past two decades appears to have slowed. Industrial production remains sluggish, and trade partnerships, once a backbone of the economy, have faced difficulties.
Nevertheless, this latest growth figure has renewed hope among investors. Following the release of the Q3 data, Mainland China’s CSI 300 rose by 0.7 per cent, and Hong Kong’s Hang Seng Index gained 1.3 per cent, indicating positive sentiment among businesses and investors.
Stimulus Impact on Foreign Investment
The stimulus package has not only improved domestic conditions but also attracted renewed interest from foreign investors and multinational companies. Confidence in China’s ability to meet its annual 5% growth target has been reignited. In fact, Tianchen Xu, senior economist at The Economist Intelligence Unit, stated, “Since real GDP expanded by 4.8 per cent in the first three quarters of the year, the full year GDP growth target of around 5 per cent is now within reach with extra stimulus in Q4.”
China’s Minister of Finance, Lan Fo’an, also hinted at the possibility of further economic support if needed, suggesting that China’s debt burden could be increased to fuel growth. This suggests the central government may introduce additional cash incentives and benefits to further stimulate economic activity.
The Road Ahead
While China’s third-quarter rebound is a positive indicator, challenges such as a shrinking population and ageing workforce remain significant threats to long-term growth. However, with the stimulus measures in place and more potential government intervention on the horizon, there is cautious optimism that China may still achieve its 5% growth target for 2024.
