China: Communist Party meets amid economic slump
July 15, 2024
Senior Chinese Communist Party officials gathered in Beijing on Monday for a key meeting to discuss the future direction of the world's second-largest economy.
The agenda-setting "Third Plenum," which brings together the ruling party's 205-member Central Committee led by President Xi Jinping for four days of discussions, begins as China announced lower-than-expected second-quarter growth.
Official statistics showed the economy grew by only 4.7% between April and June, significantly less than the 5.1% expected by analysts polled by Bloomberg. It is the slowest expansion rate since the first quarter of 2023 when the country was still emerging from its growth-crippling zero-Covid policy.
"The external environment is intertwined and complex," the National Bureau of Statistics said. "Domestic effective demand remains insufficient and the foundation for sound economic recovery and growth still needs to be strengthened."
Why has growth in China slowed down?
Experts put China's economic malaise down to a combination of internal and external factors compounded by an aging population with reduced spending power.
Abroad, deepening trade tensions with the United States and the European Union have dragged growth down. Both key foreign markets are erecting tariff barriers to protect their own markets from what they claim are subsidized Chinese goods which threaten to undercut their own products – for example in the electric automobile sector.
Domestically, a key issue remains the beleaguered real estate market, historically a key driver of China's rampant construction boom. It is now struggling, with several leading property firms mired in debt and facing liquidation.
"Domestic demand remains very weak," Macquarie Group's Head of China Economics Larry Hu told the AFP news agency. "Property is the biggest drag."
What is the Third Plenum expected to change?
Opening the meeting with a so-called "work report," President Xi "expounded on a draft decision of the [Communist Party] Central Committee on further comprehensively deepening reform and advancing Chinese modernization," according to state news agency Xinhua.
The "Third Plenum" traditionally aims to set longer-term economic goals and Xi has said the party is planning "major" reforms – but has offered few hints about what exactly might be on the table.
"While the case for reform is high, it's unlikely to be a particularly exciting affair," said Harry Murphy Cruise, an economist at Moody's Analytics. He instead expected "a modest policy tweak that expands high-tech manufacturing and delivers a sprinkling of support to housing and households."
The Communist Party's official organ, The People's Daily, also seemed to lower expectations last week when it cautioned that "reform is not about changing direction and transformation is not about changing color."
mf/rmt (AFP, AP)