China’s economy had a stronger-than-expected start to the year, despite ongoing challenges in the property sector. In the first quarter of 2024, gross domestic product (GDP) expanded by 5.3%, surpassing projections of 4.6% growth. However, first quarter retail sales growth only reached 3.1%, indicating a need for increased consumer confidence to sustain growth.
Property investment in China fell by 9.5% during this period, shedding light on the difficulties faced by real estate companies. The real estate crisis has been exacerbated by falling home prices, with the sector accounting for 20% of the economy. Major property developers like Evergrande, Country Garden, and Shimao have faced legal challenges and financial instability.
Recent data also led credit ratings agency Fitch to lower China’s economic outlook, citing growing financial risks amid economic challenges. Despite decades of rapid GDP growth, with an average of nearly 10% per year, China now faces obstacles in maintaining economic stability and growth. The need for increased household spending and consumer confidence highlights the importance of addressing ongoing challenges in the real estate sector and broader economy.