China’s economy expanded at a slower-than-expected rate of 4.6% in the third quarter of 2024, according to data released by the National Bureau of Statistics on Friday. The latest figures signal a continued deceleration in the world’s second-largest economy, which had been expected to grow at around 5% for the year. The sluggish performance in the July-September quarter reflects deeper concerns about China’s recovery from the COVID-19 pandemic, ongoing issues in the property market, and weak consumer confidence.
This 4.6% growth marks a slight decline from the 4.7% expansion recorded in the second quarter, falling short of the Chinese government’s growth target of “around 5%” for 2024. While the annual rate still shows positive momentum compared to some major economies, economists view it as a warning sign for the structural challenges China faces.
With economic engines sputtering in key sectors such as real estate and domestic consumption, China’s policymakers are under pressure to implement more robust stimulus measures to ensure a sustained recovery. Although Beijing has introduced a series of modest reforms in recent months, analysts suggest these may not be enough to achieve the long-term growth that the government is aiming for.
Despite the lifting of COVID-19 restrictions at the end of 2022, China’s economy has struggled to regain its pre-pandemic dynamism. For much of the past three years, stringent lockdowns and travel restrictions under the country’s “Zero-COVID” policy caused widespread disruption across industries, stifled consumer spending, and contributed to a growing sense of uncertainty among both domestic and international businesses.
The post-COVID reopening in early 2023 was expected to fuel a sharp rebound in economic activity, but the reality has been far less optimistic. Consumer confidence has remained stubbornly low throughout 2024, with many households preferring to save rather than spend, fearing further economic instability. Analysts attribute this to a lingering sense of financial insecurity after years of pandemic-related hardship, as well as the influence of structural issues in China’s labor market and housing sector.
“COVID-19 has left a lasting scar on China’s consumer psyche,” said Liu Chen, an economist at Bank of China International. “Even though the restrictions are gone, the damage to household spending patterns will take time to repair. Consumers are still hesitant, and this is holding back the recovery.”
One of the most significant drags on China’s economy in recent quarters has been the ongoing crisis in the real estate sector. Property development, a pillar of the Chinese economy for decades, is in the midst of a severe downturn. The problems began with the collapse of several major property developers, including Evergrande, which defaulted on its debts in 2021. Since then, the crisis has rippled through the broader real estate market, leading to plummeting home sales, falling prices, and a wave of construction halts across the country.
The government has been reluctant to intervene directly in the property market despite its importance to the economy, which has left the sector mired in uncertainty. The property slowdown has had a ripple effect on related industries such as construction, steel production, and consumer goods, amplifying the negative impact on overall economic activity.
In response to the worsening situation, Chinese policymakers have taken some steps to stabilize the housing market. Recent measures include lowering mortgage rates for existing homes, reducing down payment requirements for homebuyers, and easing regulations to encourage banks to lend more freely. However, these interventions have so far failed to reverse the broader trends of weakening demand and oversupply.
“Real estate accounts for nearly 30% of China’s GDP when you include the knock-on effects, so when this sector is in trouble, the entire economy feels it,” explained Ting Lu, chief China economist at Nomura. “The government has introduced some piecemeal measures, but they need to go much further if they want to stop the downward spiral.”
A central challenge to China’s economic recovery lies in its low levels of consumer confidence. Traditionally, China’s growth has been heavily dependent on infrastructure investments and exports. However, with global demand softening due to a slowdown in the United States and Europe, the government is now looking toward domestic consumption as a primary growth engine. Yet, the transition has proven difficult.
Since the pandemic, Chinese households have become more conservative with their spending, preferring to save and invest cautiously rather than purchasing non-essential goods or services. Official data show that the country’s household savings rate surged to record highs in 2023 and has remained elevated in 2024. For a government hoping to ignite consumer-driven growth, this pattern of cautious behavior represents a major roadblock.
Many factors have contributed to this ongoing consumer reluctance. Rising youth unemployment, which hit a record high of 21.3% earlier this year, has dampened prospects for long-term economic stability, particularly among younger generations. Meanwhile, wage growth in key sectors like manufacturing and technology has stagnated. Moreover, a lack of social safety nets, such as unemployment insurance and pension coverage, continues to fuel concerns about financial security among the general population.
“Consumers are not spending because they don’t feel confident in the future,” said Diana Choyleva, chief economist at Enodo Economics. “Until Beijing addresses the underlying issues of employment, income growth, and financial security, consumer sentiment will remain subdued.”
In the face of mounting economic pressures, Chinese authorities have introduced a range of measures aimed at boosting short-term growth. Over the past few months, the government has reduced interest rates, loosened mortgage lending rules, and cut reserve requirement ratios for banks to encourage lending. These efforts are designed to inject liquidity into the economy, ease credit conditions, and stimulate both investment and consumption.
However, Beijing has been notably cautious in deploying large-scale fiscal stimulus programs. Unlike the massive spending spree that followed the 2008 global financial crisis, current stimulus measures have been relatively modest, reflecting a desire to avoid piling on more debt. China’s debt levels have ballooned over the past decade, and the government appears determined to strike a balance between supporting growth and managing financial risks.
This restraint has left some market observers frustrated. Many economists and investors believe that the Chinese government needs to take more aggressive steps to revive the economy, particularly given the slowdown in the property sector and the subdued consumer environment. Calls for targeted fiscal stimulus, such as direct cash transfers to households or increased spending on infrastructure projects, have grown louder in recent months.
“There’s no question that China is facing headwinds, but the current policy response is too cautious,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “They need to think bigger. The country needs more substantial stimulus to kick-start demand and restore confidence.”
China’s economic woes are not limited to domestic factors. The country is also grappling with a range of external challenges, particularly in the realm of international trade and geopolitics. Tensions with the United States, which have escalated in recent years, continue to cast a shadow over China’s export sector. The U.S. has imposed a series of restrictions on Chinese technology exports, while tariffs on Chinese goods remain in place. These measures have constrained China’s ability to access critical technologies and markets, further complicating its economic outlook.
In addition, global economic conditions are deteriorating, with many of China’s key trading partners experiencing slower growth or recessionary conditions. The European Union, China’s largest trading partner, is facing high inflation and stagnating growth, while the United States is grappling with higher interest rates and a potential economic slowdown. This weakening external demand has hurt China’s manufacturing and export sectors, which traditionally play a significant role in driving economic growth.
“The global environment is challenging for China right now,” said Eswar Prasad, a professor of trade policy at Cornell University. “The slowdown in the U.S. and Europe is reducing demand for Chinese goods, while the tech decoupling with the U.S. is making it harder for China to compete in high-value industries. These external factors are putting additional strain on the economy.”
As China heads into the final months of 2024, the outlook for its economy remains uncertain. Policymakers are walking a fine line between stimulating short-term growth and addressing the structural issues that have long plagued the country. There are no easy solutions to the challenges China faces, and economists warn that the road to sustainable growth will require more than just temporary fixes.
In the coming months, analysts expect the government to roll out additional measures aimed at supporting the economy, though it is unclear whether these will be enough to meet the ambitious 5% growth target. Some experts suggest that China needs to embrace deeper structural reforms, including addressing inefficiencies in state-owned enterprises, reforming its pension system, and providing more social safety nets to encourage consumer spending.
There is also growing recognition that China’s growth model, which has long been centered on exports and investment, may need to shift toward a more balanced and sustainable approach. This could involve a greater focus on innovation, green technologies, and services, as well as measures to reduce the economy’s dependence on real estate and infrastructure investment.
“China is at a crossroads,” said Lu Ting of Nomura. “The government must make difficult choices if it wants to avoid a prolonged period of stagnation. They need to shift away from the old growth model and take steps to build a more sustainable and resilient economy.”
