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I'm Stephen Carol and this is Here's Why, where we take one news story and explain it in just a few minutes with our experts here at Bloomberg. After decades of supercharged growth, China's economic miracle is dottering. A much anticipated post pandemic recovery appears to have flopped.
You know, this is a moment in time where the global headlines are all looking more negative for China. Yeah, project prices country to decline, the which growth remains slow, labor market remains loose. There are all points two that consumption recovery will likely remain softer in the next couple of months.
If the government is serious in terms of growing the economy by about five percent, we need more policy support from the government.
The latest growth figures show the slowest pace of expansion in over a year. Consumer spending is we and the property slump is ongoing. The official growth target of around five percent annually is still within reach thanks to a boom and exports, but there are risks there too. So here's why China's economic outlook keeps getting worse. Are Greater at China. Executive editor John Leuho joins US now for
more Hi John. So, the Chinese economy grew four point seven percent, but in April and June that's a figure other countries would love to see. But how bad is it in a China context? Well, it's kind of bad.
It's the slowest that GDP has grown in six quarters, and I think beyond the actual pace of growth, it's the trajectory. And so you have to remember, for the first twenty years of this millennium, China was growing at nine ten double digit percentage points. When it came to GDP, I remember in two thousand and seven, I think it
was the second quarter China's GDP grew fifteen percent. And so if you're coming from a world where GDP is growing that quickly to a world where it's growing at five four point eight, four point seven, it's a big come down, and I think that's what's got people worried.
So one of the problem parts of the Chinese economy.
Then, well, the biggest problem at the moment is the real estate sector. There was a housing bubble that burst about three years ago, and so we've seen prices come down substantially, sometimes by half in some Chinese cities. We've seen the number of homes sold falling tremendously. I think it fell twenty six twenty seven percent in the month of June from a year earlier. And we've seen the amount of money being spent to build new homes fall off dramatically as well. And so that is on one hand,
reduced the amount of spending by developers. But more importantly, the vast majority of household wealth is stored in property, and so if home prices come down, everybody feels a little poor. And so that's led to a really subdued consumption. People are not as are not spending as much, they're trying to save more, and that's flowing into the economy and keeping things weak.
So what is China doing about this? Then, present cheating thing says he wants high quality development. What does that mean?
Well, high quality development is mostly about debt. So over the last five, six, seven, eight nine years, a lot of Chinese growth came from investment, and what that was was a local government's borrowing money to build roads, to build airports, to build apartment buildings, office buildings, And now all of those debts are coming due and those buildings and roads that were built, they're not generating the sort of economic activity that would help pay off those debts,
and so overall debt for China is now in the neighborhood of something like three hundred and fifty percent of GDP. So President Hijiping is really worried that if China continues on this model, it's going to end very poorly. And so he's talking about high quality in the sense that we're going to get growth without creating more debt.
Okay, So the third Planum Policy Meeting is meant to set long term economic goals, but will anything they decide actually help in the short term with the issues that you've been telling us about.
There have been a lot of economists who have been suggesting and recommending that the government in Beijing give direct transfers to consumers, so just give the average Chinese citizen money like that happened in the United States during the pandemic. There's been a lot of hesitancy in terms of the government's response to those ideas. If we got some sort of change in the way the government looked at that proposal, that would really help with sentiment. Again, another thing, the
retirement age. There's been a lot of economists suggesting the retirement age should be raised. If they came out and did that, that would have a very immediate impact as well.
We've heard a lot in the conversation in the US election campaign about the threat of more tariffs on China. How much of a concern would that be for the Chinese economy.
It would be a real concern consumptions down. As we talked about in one of the bright spots of the economy has been exports and specifically electric cars, batteries, solar panels, some of these new technology, high end industries, and if tariffs came in that one would really undermine the growth that exports has created in terms of jobs and investment here in China. But two, it would really undermine this
further development of things like the electric car industry. If China wants its electric car industry to really grow and flourish, it needs to have access to foreign markets. If it can't sell to the US, if it can't sell to Europe, that's really going to make things tough.
And China's targeting a growth rate of five percent over time or what that need to slow down. If we think about the future.
As the economy gets bigger, I think naturally the pace of growth will slow, and if China wants to achieve high quality growth as we talked about, that pace will have to come down as well. But I think there's different ways to look at it. At five percent, China's a seventeen trillion dollar economy. At five percent, that's adding about eight hundred and fifty billion dollars of economic activity years.
That's the size of Switzerland basically, and so yes, the economy will grow more slowly, but it will still be a big, big impact on overall growth globally.
What does though a weaker Chinese economy in terms of growth mean for the rest of the world.
I mean, China is a huge in market for a lot of things. It's a huge market for iPhones. Recently, we've had some news about Apple selling eight billion US dollars worth of stuff in India, and there's a lot of excitement about that because it's growing very quickly. But just to give your sets by comparison, Apple sells seventy two billion dollars worth of stuff in China. So it's a huge market for lots of very big important companies.
And if that market slows If that market shrinks, it'll have big impacts all around the world.
Thanks to our Greater China Executive editor, John lu. For more explanations like this from our team of twenty seven hundred journalists and analysts around the world, search for quick take on the Bloomberg website or the Bloomberg Business app. I'm Stephen Caroll. This is here's why. I'll be back next week with more. Thanks for listening.