Beijing: China's economic growth decelerated in the three months leading up to the end of September, influenced by ongoing issues in the property market and escalating trade tensions with the United States. The world's second-largest economy expanded by 4.8% compared to the same period in the previous year, marking its slowest pace in a year, as revealed by official figures published on Monday.
According to BBC, the slowdown follows China's imposition of extensive controls on the export of rare earths, which are crucial for global electronics production. This action has disrupted the fragile trade truce with the US. China had aimed for "around 5%" economic growth this year, managing to avoid a significant downturn with the help of government support measures and a previously stable trade relationship with Washington.
The recent imposition of rare earth controls by China prompted a swift reaction from US President Donald Trump, who threatened to introduce an additional 100% tariff on imports from China. Meanwhile, US Treasury Secretary Scott Bessent announced plans to meet Chinese officials in Malaysia this week to try to ease tensions and arrange a meeting between Trump and Chinese President Xi Jinping.
Before the recent escalation in tensions, Chinese businesses had utilized the trade truce to increase shipments to the US, contributing to an 8.4% rise in China's exports in September. The total value of imports into China also increased. Additionally, China's industrial output saw a growth of 6.5% compared to the previous year, with sectors like 3D-printing, robotics, and electric vehicles showing strong performance. The service sector, encompassing IT support, consultancies, and transport and logistics companies, also experienced growth.
The latest data indicates that China's export activities have helped counterbalance its "sluggish" domestic spending. Sheana Yue, a senior economist at Oxford Economics, noted that Beijing has invested billions in incentives such as subsidies, higher wages, and discounts to encourage local spending and bolster the economy. However, Yue expressed skepticism that China's economic growth this year would surpass 4.8% without additional government support, potentially outlined in the new Five-Year Plan.
China's property sector continued to face challenges, with real estate investment declining by 13.9% over the year up to September. The housing market is experiencing a downturn characterized by decreasing home prices, reduced sales, and some developers abandoning projects. The real estate sector, which constitutes about a third of the Chinese economy, has been a crucial revenue source for local governments. Despite government support measures, home prices have fallen in nearly all major cities, as noted by Laura Wu, an economics lecturer at Nanyang Technological University. Prof. Wu highlighted that, in the long term, housing remains a significant impediment to China's economic growth, compounded by uncertainties from US tariffs and other trade barriers.