China Aims for 5% Economic Growth Amid Global Challenges

China is set to release its third-quarter economic growth data on Wednesday, as the country strives to achieve a target of approximately 5% growth for the year. Economists surveyed by Reuters anticipate that the gross domestic product (GDP) has expanded by 4.4% in the third quarter. This growth trajectory keeps China on course to reach its 5% annual target, following year-on-year GDP growth of 4.5% in the first quarter and 6.3% in the second.

While this 5% target represents one of the country’s lowest growth rates in decades, Chinese officials have been intensifying financial stabilization efforts, particularly in the property and banking sectors. Additionally, support measures have been implemented to bolster the country’s stock market and the renminbi.

In response to these challenges, dozens of Chinese-listed companies have recently announced or executed share buyback plans, aligning with government measures aimed at boosting the stock market’s performance.

These measures highlight the challenges faced by the world’s second-largest economy in delivering a post-pandemic rebound and the difficulties Chinese economic planners encounter in finding drivers for growth.

Forecasts for next year’s GDP growth have been revised downward to approximately 4.5%. Consumer and business confidence remain weak, and external demand for Chinese exports is further complicated by factors such as the Israel-Hamas conflict in the Middle East.

Here are five key aspects to watch for in the upcoming economic data release:

1. Consumer Spending Green Shoots: Retail sales, which have been lacklustre throughout the year despite the end of COVID-19 restrictions, showed signs of improvement in August, with a 4.6% year-on-year increase. However, consumer confidence remains affected by challenges in the property market, and the current improvements should be viewed in the context of the lockdowns in 2022.

2. Property Woes: The property market continues to face challenges, including weak apartment sales and debt defaults by developers. The government has implemented measures to stabilize the market, but the impact remains mixed, with property investment down nearly 9% in the first eight months of the year.

3. Export Outlook Darkens: Soft international demand has become a significant concern, with China’s exports declining. While the situation has improved from the sharp drop in July, factors such as the Israel-Hamas conflict and geopolitical tensions are complicating China’s external trading outlook.

4. Questions Over Investment: Fixed asset investment has shown growth in 2023, partly driven by the government’s efforts to boost investment in manufacturing. However, there are concerns that this shift may not necessarily result in productive investment, and there is a need for demand expansion.

5. Calls for Stimulus and Reforms: Economists have called for Beijing to stimulate domestic consumption and implement economic reforms. The upcoming third plenum of the Chinese Communist Party’s central committee may shed light on the government’s approach to these challenges.

As China faces these economic headwinds, policymakers are working to stabilize and support the economy to meet the 5% GDP target, although the path forward remains complex and uncertain.