Despite facing challenges in its property sector, China’s economy started the year off stronger than expected. Official data revealed that the country’s gross domestic product (GDP) expanded by 5.3% in the first three months of 2024, exceeding expectations of a slower growth rate of 4.6% in the first quarter. However, first quarter retail sales growth dipped to 3.1%, indicating a potential slowdown in consumer confidence.
According to Harry Murphy Cruise from Moody’s Analytics, household spending is crucial in driving growth, as China aims to reach its target of around 5% growth. Property investment fell by 9.5% in the same period, highlighting the challenges faced by real estate businesses. The ongoing property market crisis was further emphasized by new data showing a significant decline in new home prices, the sharpest drop in over eight years. This crisis was exemplified by the recent liquidation of property giant Evergrande and the financial troubles faced by other major developers in the country.
As China grapples with economic challenges, credit ratings agency Fitch recently downgraded its outlook for the country due to increasing financial risks. Despite decades of rapid economic growth, China is now facing a more challenging economic landscape, with the need for consumer spending and other sectors to drive sustainable growth.
