Beijing (AFP) – China’s economic growth is expected to again miss its official target on Monday, dragged down by a global energy shock and slumping domestic demand, with surging exports the only bright spot. The world’s second-largest economy has charted a diverging path in recent years—an AI-fuelled export boom is masking the impact of a persistent real estate crisis and gloomy consumer sentiment.
Beijing is hoping for annual growth this year of 4.5 to 5.0 percent, its lowest goal in decades. But an AFP poll of economists suggests growth fell just below that range from July to September at 4.4 percent—still a slight improvement from the second quarter’s 4.3 percent. “Exports seem to be the only outperformer,” Guo Shan of Hutong Research told AFP. She said China risked missing its official target for the year, spurring a recent roll-out of mortgage subsidies for certain home purchases and support for infrastructure investment. Beijing “will need to work faster to deploy the funds so as to hit the growth target,” she added.
The Chinese economy is also under pressure from the spiking cost of energy caused by the US war with Iran, which has stymied shipping from the oil-rich Gulf. China is the world’s largest importer of crude oil. Higher crude prices and “protracted uncertainty and structural headwinds” led the International Monetary Fund to last week slightly downgrade its projection for China’s annual growth this year to 4.5 percent. IMF officials gathering in Bangkok for the fund’s meetings with the World Bank described Beijing’s recent support measures as “limited”.
Economists say that China’s economy must shift towards a more sustainable growth model powered more by domestic consumption than traditional drivers like construction, property development, and exports. That long-awaited “rebalancing” of the Chinese economy has yet to materialize, IMF Asia and Pacific department director Krishna Srinivasan said. Exports— for decades the engine of China’s economy—remain a bright spot. Official data released last week showed that China’s overseas shipments were on course for another record trade surplus after reaching $1.2 trillion last year.
That export boom has been underpinned in large part by insatiable global demand for AI-related products including computers, semiconductors, and data center equipment. But elsewhere, China’s soaring surpluses are increasingly stoking tensions with key trading partners, including the European Union and the United States. Talks this month between EU trade chief Maros Sefcovic and Chinese counterpart Wang Wentao ended with an agreement to limit exports of Chinese hybrid vehicles to Europe. Many critics contend that Beijing’s extensive subsidies doled out in recent years to domestic industries have given them an unfair advantage in foreign markets. Domestic demand woes have also exacerbated the problem, as manufacturers increasingly look overseas for new growth.
© 2024 AFP
