China’s economy started the year off stronger than expected, with a 5.3% growth in GDP in the first quarter of 2024. This exceeded expectations of a 4.6% growth rate, despite challenges in the property sector. In March, Beijing had set a growth target of around 5% for the year.
Retail sales growth in the first quarter fell to 3.1%, indicating a slowdown in consumer confidence. Analysts suggest that for China to reach its growth target, households need to contribute more to the economy. Property investment also decreased by 9.5% during this period, reflecting the struggles faced by real estate firms in China.
The ongoing property market crisis has had a significant impact on the economy, with the sector accounting for around 20% of China’s GDP. In March, new home prices experienced the fastest decline in over eight years. High-profile property developers, such as Evergrande, have faced liquidation orders and winding-up petitions in Hong Kong.
Credit ratings agency Fitch recently downgraded its outlook for China, citing increasing financial risks and economic challenges. Despite these challenges, China’s leaders reported a 5.2% growth rate for 2023 at their annual gathering in March. The Chinese economy has historically maintained high growth rates, with annual GDP growth averaging close to 10% over several decades.