China’s economy seen missing target as global shocks bite

The International Monetary Fund has slightly downgraded its July projection for China's annual economic growth to 4.5% amid higher crude prices, prolonged uncertainty and structural headwinds. (AFP pic) BANGKOK: China's economy likely grew at a slower pace than the government's target in the third quarter (Q3), an AFP survey of analysts shows, as energy, geopolitical and debt crises stoke fears of a global downturn.

Leaders in Beijing have struggled for years to reverse a stubborn slump in the once-booming real estate sector, which has dampened consumer confidence and weighed on overall activity.

The stagnation has coincided with several major shocks on the global economy, including the Covid-19 pandemic, recurring trade rows and multiple wars.

Official data due on Monday is expected to show the world's second-biggest economy expanded 4.4% year-on-year in July-September, according to economists polled by AFP.

While representing a slight improvement from the second quarter's 4.3%, the reading would fall short of the government's target for this year of 4.5%-5%- itself the lowest goal in decades.

"Available data so far suggests China's economy lost momentum" during the period, Sheana Yue, a senior economist at Oxford Economics, told AFP.

"The main challenge is persistently weak domestic demand, particularly consumption and property investment, which additional infrastructure spending is unlikely to reverse quickly," she said.

The lacklustre forecast comes as officials and experts converge in Bangkok to discuss economic issues at the Annual Meetings of the International Monetary Fund (IMF) and World Bank.

In its closely watched World Economic Outlook released on Tuesday, the IMF slightly upgraded its global 2026 forecast, while warning of a "split" state of affairs as wide-ranging risks test economic resilience.

The report said that although a recent boom in artificial intelligence had spurred new activity, soaring energy costs caused by the Iran war and skyrocketing government debt posed increasing threats to global growth.

In China, higher crude prices - combined with "protracted uncertainty and structural headwinds" - led the IMF to slightly downgrade its July projection for the country's annual growth to 4.5%.

Export reliance

Asked by AFP during a Thursday news conference about that revision, Asia and Pacific department director Krishna Srinivasan said a "rebalancing, which (the IMF has) been talking about for some time, has not really been realised".

"Beijing's recent support measures are 'quite limited', and 'we think that a lot more is needed in terms of fiscal stimulus in the near term until the economy reflates'," he added.

Official data released Wednesday showed China's exports continued their historic surge, providing a much-needed boost to the economy.

However, the vast flow of shipments has also tested relations with major trading partners including the US and the EU.

IMF boss Kristalina Georgieva said in Bangkok on Wednesday that China's growth model must "shift from export more towards domestic consumption" in order to address global imbalances.

While exports were the key "booster", Q3 was "particularly difficult" for China, as retail performance was weak and fixed-asset investment declined, Dan Wang, a director on Eurasia Group's China team, told AFP.

She added that she expected spending in the final quarter "to speed up but only enough to meet the lower bound of (the government's) growth target".

Figures Wednesday showed consumer price inflation remained subdued last month and has been stuck below Beijing's 2% target for more than three years.

Recent measures by Beijing aimed at property sector stabilisation and job creation "form a modest, targeted 'mini-stimulus'", Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis, told AFP.

"These should support fourth-quarter investment, ease local fiscal stress and help hit the growth target," she said.

The latest steps are mainly concentrated in "strategic infrastructure investment", said Oxford Economics' Yue, meaning that they are "likely to generate weaker near-term employment and income gains than previous stimulus cycles".

"Higher energy prices will add to cost pressures, but excess capacity and soft demand should limit firms' ability to pass these on to consumers," she added.