Authors: Ellen Zhang and Kevin Yao

BEIJING (Reuters) – China’s economy likely grew 5.1% in the second quarter from a year earlier, slowing after a strong start in the first three months due to weak consumer demand, keeping alive expectations that Beijing will have to roll out more stimulus.

While that level of growth would allow China to meet its full-year target of around 5%, policymakers still have to cope with a prolonged housing slump, weak domestic demand, a weakening yuan and trade disputes with the West.

Gross domestic product (GDP) in the world’s second-largest economy is set to grow 5.0% year-on-year in 2024, according to the median forecast of 82 economists surveyed by Reuters. Analysts predict a slower 4.5% rise in 2025.

Analysts say a further slowdown in the second half of 2024 could prompt policymakers to increase economic support, which is currently based mainly on foreign demand.

Investors are watching a meeting of top party leaders next week to learn what strategies they can use to address challenges beyond industrial modernization.

Policy advisers also say China could implement tax and fiscal reforms to help indebted local governments raise more tax revenue and ease pressure on local finances.

Growth in the second quarter is forecast to be slower than the 5.3% increase in the first quarter and the weakest since the third quarter of 2023.

A Reuters poll predicts GDP growth will slow further to 4.8% and 4.7% in the third and fourth quarters, respectively.

“Despite the ongoing housing crisis, China’s economy breathed a sigh of relief in the first half of the year thanks to strong exports, which in turn were driven by some countervailing forces and policy measures related to real estate,” Ting Lu, Nomura’s chief China economist, said in a note on Wednesday.

However, it expects year-on-year GDP growth could slow significantly to 4.2% in the second half of the year from around 5.0% in the first half, “unless Beijing increases stimulus by significantly accelerating injections of funds to complete unfinished, pre-sold homes.”

Authorities in May allowed local state-owned enterprises to buy unsold completed homes, and the central bank released a 300 billion yuan ($41.23 billion) loan for affordable housing. Analysts say markets now need to be more patient about additional measures to support housing.

Official data released on Wednesday showed China’s consumer inflation in June came in below expectations, pointing to persistent deflationary risks.

Analysts polled by Reuters estimate that consumer prices in China will rise 0.6% this year, well below the government’s target of about 3%, and will rise 1.5% in 2025.

The story continues

The government will release second-quarter GDP data and retail sales, industrial production and investment data for June at 02:00 GMT on 15 July.

MORE SUPPORT EXPECTED

To counter weak domestic demand and a slump in the real estate market, China has increased infrastructure investment and poured resources into high-tech production.

Central bank Governor Pan Gongsheng pledged last month to stick to a supportive monetary policy stance and said the bank would flexibly use policy tools, including interest rates and reserve requirements, to support economic development.

However, the central bank is likely to be cautious about cutting interest rates further, as aggressive monetary easing could trigger more capital outflows from struggling Chinese financial markets and put pressure on the yuan, which has fallen to a nearly eight-month low against the dollar.

It could also hurt banks already struggling with margin pressure, leading to pay cuts for employees. Analysts say more layoffs and pay cuts would exacerbate deflationary risks.

Analysts polled by Reuters expect a 10 basis point cut in China’s annual mortgage rate and a 25 basis point cut in banks’ reserve requirement ratio in the third quarter.

(To read other articles in Reuters’ suite of polls on the world’s long-term economic outlook:)

(1 dollar = 7.2755 Chinese yuan)

(Poll by Rahul Trivedi, Devayani Sathyan and Susobhan Sarkar in Bengaluru and Jing Wang in Shanghai; reporting by Ellen Zhang and Kevin Yao; editing by Sam Holmes)

Working with residents in need of help, they go door to door every day and, as needed, run errands for them, with particular attention paid to “five specific groups”: people struggling with frustration, failed investments, mental disorders, relationship problems or mental disorders.

“All [working] “she was very tense,” Liu said.[We’re] “paying attention to families who are long-term unemployed or in debt, offering them individual care to distract from their depression and anger.”

10:28

‘Let It Rot’: Surviving China’s High Unemployment and High Cost of Living

‘Let It Rot’: Surviving China’s High Unemployment and High Cost of Living

The reaction of Chinese social media users to the latest spate of brutal attacks reflects widespread discontent over the country’s economic recession and deteriorating job prospects.

“The police told us that [the attacker] was unemployed and down on his luck, and someone in our group bumped into this man,” said one of the four men, as quoted by NBC News.

“And he decided to answer the way he did.”

On June 19, a man reportedly stabbed three passengers at a Shanghai subway station. The case is under investigation.

Meanwhile, two separate clashes between customers and staff at a Manner Coffee shop in Shanghai sparked heated online debate, with related threads on microblogging platform Weibo racking up billions of views.

Tens of thousands of users posted comments under posts about these incidents, discussing whether the riots were caused by high work intensity and low wages.

According to local media reports, the average barista at Manner Coffee has to make more than 300 cups of coffee a day, earning about 6,000 yuan ($825) a month.

The rise in these incidents can be attributed at least in part to rising unemployment, said Yu Hai, a sociology professor at Fudan University in Shanghai. “The middle class, in particular, is the group that has been hit hardest by unemployment and falling incomes.”

Private companies in China, which have struggled to return to growth since the pandemic, employ more than 80% of city workers.

“Falling job and income expectations are causing conflicts between different social classes. The government must recognize that these incidents are not isolated but reflect broader social trends,” Yu said. “The middle class in particular will shrink during this wave of economic crisis, and its anxiety and despair will grow accordingly.”

As we read in the article, the cause is the “negative evolution of social mentality” in the national and international environment.

“Factors such as children’s education, income pressures, mortgage costs, and resilience to psychological stress have led to a gradual transformation of offline to online pressures, which has resulted in increased hostility and increased confrontation in public opinion.”

Liu Fei, a social worker, said this fits with her own experience. “When the economy is in recession, people become more aggressive, and conflicts between strangers increase. I remind my family every day not to argue with strangers.”

According to the Urban Depositor Survey report conducted by the People’s Bank of China – a survey of more than 20,000 households nationwide – the Income Sentiment Index, Income Confidence Index and Labor Sentiment Index have been declining and remaining at low levels for the past three years.

In the first quarter of 2024, 13.2% of residents said they expected their income to increase, 69.6% said they thought their income would stay the same, and 17.3% expected their income to decrease compared to the previous quarter.

The income confidence index was 47.0 percent, the PBOC said, with 10.5 percent of residents agreeing with the statement “the situation is good, employment is easy.” Meanwhile, 43.0 percent considered the situation “average” and 46.5 percent agreed with the statement “the situation is serious, employment is difficult.”

Calling for “full and high-quality employment,” Xi was clearly referring to widespread complaints of illegal layoffs at some companies and pointed to a mismatch between supply and demand for labor in some sectors, especially among young people.

“Employment is the most basic source of people’s livelihood. It is related to the healthy development of the economy and society and the long-term stability of the country,” Xi said, according to the official Xinhua news agency.

“The core of the current government’s policy is still [control risk]but the government should work with society to overcome difficulties,” Yu said. “Social and urban management policies must be tolerant, compassionate and empathetic.”