China's economic growth moderated in the second quarter (Q2) of 2024, with year-on-year (YoY) growth slowing to 4.7 per cent from 5.3 per cent in the first quarter, according to The Conference Board. The slowdown is attributed to weak domestic demand, reflecting the negative impact of structural challenges, which has affected the private sector and consumer confidence.

Despite the deceleration, China's economy still achieved 5 per cent growth in the first half of the year. The Conference Board maintains its 2024 growth forecast at 5 per cent, anticipating increased government support in the second half.

Manufacturing investment remained robust in Q2, and it is expected to accelerate further as more of the RMB 1 trillion (approximately $138.46 billion) earmarked in ultra-long special treasury bonds for this year are issued, as per TCB.

Retail sales growth slowed to 2 per cent YoY in June, down from 3.7 per cent in May. The short-lived surge in demand seen during the May Day holiday and the annual 618 online shopping festival underscores the overall weakness in consumer confidence. This is compounded by moderated household income growth in Q2, driven by ongoing labour market weaknesses, which are expected to further constrain consumer spending.

Export growth accelerated to 8.6 per cent YoY in June from 7.6 per cent in May. This increase was driven by a low base of comparison and front-loading of orders by importers in the US and the EU ahead of tariffs. While this front-loading is likely to sustain export growth in the short term, it may signal a worsening outlook for Chinese exports in the future.

The Chinese economy is expected to achieve its official growth target of ‘around 5 per cent. for 2024, supported by supply-side stimulus and periodic boosts in consumption during holidays and online shopping festivals. However, unless structural imbalances that weigh on growth are addressed, the market will likely continue to experience weak spending and price-based competition, leading to downward pressures on profits.

In the meantime, the top priority for China remains strengthening the resilience of its economic and governance systems against domestic and external volatility. The government is expected to implement further support measures to sustain growth and address structural challenges.

Fibre2Fashion News Desk (DP)