China’s economy continued to grow at a sluggish pace over the summer, according to data released Friday, underscoring the urgency of the government’s latest efforts to boost the economy.
Construction activity has slowed due to a slump in the housing market. Millions of young college graduates are unemployed. Many local governments have run out of money to build roads or even pay teachers and other workers.
Prices are falling across the Chinese economy for everything from apartments to cars to restaurant meals. Widespread falling prices, a phenomenon known as deflation, make it harder for firms and households to earn enough to pay their mortgages and other debts.
China’s economy grew 0.9 percent in the three months from July to September, according to China’s National Bureau of Statistics. When projected for the full year, the economy grew at an annual rate of about 3.6 percent in the third quarter.
The growth partly reflected an official revision on Friday, showing that the second quarter was weaker than previously agreed. Growth between April and July was at a 2 percent annual pace, and not the 2.8 percent previously reported.
Beijing has announced a series of measures since September 24 to address the lingering problems evident in the numbers released Friday. The central bank has reduced interest rates and minimum down payments for mortgages. The finance ministry has promised to sell more bonds to raise money for local governments to buy vacant apartments to convert them into municipal salaries and affordable housing.
“The timing of the stimulus shows that the government is aware of the deterioration of the economy,” said Louis Liu Qian, founder and chief executive of Wusawa Advisory, a Beijing geopolitical and business consulting firm.
Investors initially reacted with a tepid response to the announcement of economic data on Friday, but stock prices in China later rose when the central bank’s governor unveiled details of a plan to expand lending to buy stocks.
Shopkeepers complain that sales are weak, and even though they cut prices so drastically, they make little or no profit.
“We don’t have any transactions right now,” said Yu Jingjun, a wallpaper dealer in Jibo, east-central China, as he sat idly in his empty shop on a recent weekday. “When real estate fails, everything else follows.”
Having worked in the home decoration industry for over a decade, Mr. Yu has seen much of his sales evaporate over the past several years. “There was a time when no orders were unthinkable, but now, it’s been years since I last received an order,” he said.
But the Bureau of Statistics reported Friday that overall retail sales rose 3.2 percent in September, down from just 2.1 percent in August. One component of that data was sales of home appliances and electronics, which rose 20.5 percent last month after the government sharply increased trade subsidies over the summer. Small discounts introduced last spring were dismissed by many shoppers as too frivolous.
The slowdown in growth was less visible in the Chinese government’s favorite statistic: the change in the third quarter compared to the same period last year. By this measure the economy grew 4.6 percent year-on-year, up from 4.7 percent in the second quarter.
Falling prices are not only a problem for China domestically, but also in its foreign trade. Deflation is starting to hurt exports, China’s only remaining economic strength, this year.
In September, the overall value of China’s exports grew just 2.4 percent from a year earlier, as ever-increasing export volumes were largely offset by Chinese companies receiving less cash for each load.
For the past four years, China has relied on rapidly expanding exports to offset difficulties in its domestic economy. From cars to chemicals to solar panels, physical volumes of China’s exports continue to rise strongly.
But as Chinese companies try to clear excess inventory in their warehouses, the money China receives for each product is falling.
The number of cars and trucks exported by China increased by 36 percent in the last three months from a year earlier. But their total value increased by 29 percent, according to data from China’s General Administration of Customs. This means that the average price of each exported motor vehicle has fallen.
Similarly, the number of flat-panel displays exported by China increased by 12 percent in the last three months from a year ago. But their total value rose about half as fast.
The outcome is in some ways the worst for China. The country’s soaring exports and growing market share in foreign markets have fueled a backlash in many countries, prompting tariffs.
Chinese officials argue that they are ready to pursue the response that many foreign and Chinese economists have been recommending for months: strengthen the domestic economy. Finance Minister Lan Fon said on Saturday that he would “soon launch a package of future-targeted incremental policy measures to stabilize growth, expand domestic demand and reduce risks”.
Central to that work is stabilizing the construction sector and other real estate-related industries, which accounted for a quarter of the economy before the asset meltdown began three years ago. Real estate investment fell 10.1 percent in the third quarter from a year earlier, the Office for National Statistics said on Friday.
Compared to the same period in 2019 before the pandemic, the total square footage of buildings fell 66 percent in the first nine months of the year. Data on so-called construction starts are important because they indicate how much activity will take place over the next several years.
Shanghai recorded more existing apartment sales on October 13 than any day since September 2023, state media reported. But even in Shanghai, buyers are wary after three years of flat or falling prices.
“The investment appeal is gone, now it’s necessary to buy a house for practical needs,” said Gao Longguan, a Shanghai real estate agent. “Despite the increase in apartment viewings, buyers remain relatively cautious.”
Many analysts have warned that China’s economic woes echo Japan’s struggles a generation ago. But some believe the government’s stimulus measures could reduce the chances of the outlook worsening.
“China is in the midst of a debt-mongering spiral, but Beijing’s recent economic policy U-turn will go a long way to prevent China from repeating Japan’s experience in the 1990s,” said chief economist Diana Zoileva. My economyThe London Research Institute focuses on China.
Li Yu Research contributed.
