Chinese President Xi Jinping has emphasized that the country’s economic recovery is “still at a critical stage,” as reported by state broadcaster CCTV. Speaking at a meeting of China’s Communist Party Politburo, Xi acknowledged challenges posed by sluggish domestic activity and issues in the property sector that continue to impede the post-pandemic rebound.
Despite China’s economic expansion of 4.9 percent in the third quarter, slightly below the Beijing target of five percent, Xi urged measures to stimulate the economy. He highlighted the complexity of the development situation, citing increasing adverse factors in the international political and economic environment. Xi stressed the need to accelerate the construction of a modern industrial system, expand domestic demand, and effectively prevent and defuse risks.
Xi also underscored the importance of reinforcing “self-reliance” in key science and technology sectors, advocating for an acceleration in the construction of a new development layout.
Chinese officials have grappled with sustaining economic recovery post-COVID, even after lifting strict containment measures in 2022. November’s announcement of rising exports marked the first increase in seven months, although the comparison is against a low base from the previous year’s pandemic impact.
However, concerns persist, and Moody’s downgraded China’s credit rating outlook to negative from stable, citing broad downside risks to fiscal, economic, and institutional strength. The finance ministry in Beijing expressed disappointment with Moody’s decision, dismissing concerns about the economy as unnecessary.
The property sector, a traditional growth engine, exacerbates worries for China. The real estate industry is facing a severe debt crisis, with major developers owing significant sums and the risk of going out of business. This situation has contributed to a negative outlook for the economy, affecting buyer trust, causing home prices to plummet, and threatening to impact other sectors.
Ting Lu, Chief China Economist at Nomura, highlighted the ongoing challenges in the property sector as the “single largest drag affecting China’s economy.” Despite recent stimulus measures, analysts remain cautious, and the trajectory of China’s economic recovery remains uncertain, with concerns about the bottoming out of the property market and its broader economic implications.
