Recently, Guangdong Province announced that its economic growth in the first quarter was lower than the national average, largely due to the drag from the real estate industry. Guangdong has failed to meet its GDP growth target for two consecutive years, raising doubts about an economic “slowdown.” Against the backdrop of escalating trade tensions between the US and China, as a major foreign trade province, Guangdong’s economic outlook is expected to be even dimmer.
According to data released by the Guangdong Statistics Bureau, the province’s gross domestic product (GDP) grew by 4.1% in the first quarter of this year, which is lower than the national average for the same period in China.
Historically, external observers have been skeptical of official Chinese data, as it is often accused of concealing unfavorable situations and falsifying information. Therefore, official data should be taken with caution as it may not fully reflect the actual economic conditions. The figures from Guangdong, as China’s leading economic province, paint a bleak picture, reflecting the challenging economic reality in China.
The real estate industry’s impact on Guangdong’s economic growth is particularly evident. Reports from the Guangdong Provincial Statistics Bureau and various mainland media outlets, including the Southern Metropolis Daily, show a 6.2% year-on-year decrease in fixed asset investment in the first quarter. Real estate development investment dropped by 15.2%, with residential property investment declining by 13.5% and new residential sales area down by 9.4%. These figures indicate that the sluggish real estate market has significantly affected Guangdong’s overall economic growth.
Professor Lin Jiang from Lingnan College of Sun Yat-Sen University, interviewed by First Financial, stated that Guangdong’s first-quarter economic growth was below the national average of 5.4%, attributing the province’s economic slowdown to the drag from the real estate sector.
According to a report by Jiemian News, weak consumer demand has also posed a challenge. The Guangdong Provincial Statistics Bureau noted that external circumstances remain complex and severe in the first quarter, with lingering constraints on effective demand.
In a meeting held by the Guangdong provincial government on April 21, emphasis was placed on continuing efforts to stabilize the real estate market and prevent and mitigate financial risks.
Since the beginning of this year, especially in February and March, many bloggers in Guangdong have complained on social media about sharp drops in housing prices in certain areas of Guangzhou, with some properties experiencing significant devaluations.
In early 2024, after the release of economic data for all 31 provinces and regions in China, 23 of them failed to meet their annual targets. Among the six major economic provinces, Guangdong fell short of its 5% target in 2024, with an economic growth rate of 3.5%. A comparison with concurrent data from other major economic provinces like Jiangsu and Zhejiang further highlights Guangdong’s economic challenges.
Analysts point out that Guangdong’s economic growth has been consistently below the targets set by the central government since 2020, impacting the growth rates of cities like Guangzhou and Foshan. This, in turn, has led to poor economic performance for Guangdong as a whole.
Southern Finance & Economics Media observed that Guangdong’s share of the national economy has long been above 10%, serving as a significant driver for the entire country’s economic growth. Consequently, when the national economy faces challenges, Guangdong often bears the brunt sooner and to a greater extent.
According to a report by Sing Tao Daily, some analysts believe that Guangdong’s position as the leading economic province may not be sustainable. Guangdong, as the top province in foreign trade, has traditionally accounted for around 20% of the country’s total trade volume. The impact of the US-China tariff war is expected to become more pronounced in the second quarter, potentially causing more disruptions to Guangdong’s economy.
The trade tensions between the US and China have significantly affected Guangdong’s foreign trade, primarily seen in reduced export orders or even cancellations. Many Guangdong export companies have reported direct cancellations or delays of existing orders from US customers, risking loss of revenue, even if some orders have already been paid for.
A business owner in Foshan, Mr. Li, who operates a factory producing aluminum alloy doors and windows with an annual turnover of about 30 million yuan, mentioned a sharp decline in orders recently. With production stalling and costs mounting, the business is facing potential losses.
Although there is no latest overall data on Guangdong’s foreign trade to quantify the specific impact of the tariff war, the widespread decrease in export volume reported by businesses suggests a high likelihood of a negative effect on Guangdong’s economic growth expectations.
In the current complex external economic environment, if the real estate sector continues to decline, foreign trade remains sluggish, coupled with high unemployment rates and tight local finances, Guangdong’s role as the engine of China’s economy may face challenges, potentially exerting a drag on the national economy.