Before the Third Plenary Session of the CPC, economic data released by the Chinese Communist Party claimed that the GDP in the second quarter grew by 4.7% year-on-year and 0.7% quarter-on-quarter. The total retail sales of social consumer goods in the first half of the year increased by 3.7% year-on-year, but the growth in June was only 2.0%. Various indicators in the real estate sector continue to show double-digit declines. Experts point out that despite the adjusted data by the CCP, it still falls below expectations and hits a new low, showcasing that the root of China’s economic issues lies in institutional problems, as a natural result of the Party’s control over the economy.
The National Bureau of Statistics of the Chinese Communist Party released a set of economic data on the day of the Party’s 20th Third Plenary Session (July 15). After the conclusion of the Third Plenary Session (July 18), the authorities issued a communique stating that the session unanimously acknowledged the achievement of “economic recovery and improvement” since the previous session.
Economist Li Hengqing from the American Institute for Economic and Strategic Studies told The Epoch Times that during significant Communist Party meetings, positive news is needed, especially good economic data, to prove the correctness of the Party’s leadership and guidance.
While all of the CCP’s data is manipulated, the data released before the meeting is “unsurprisingly lackluster and nothing to boast about,” according to Li Hengqing.
The GDP data for the second quarter and the first half of this year released by the National Bureau of Statistics of the CCP shows that the second quarter GDP only grew by 4.7% year-on-year, with a quarter-on-quarter growth of 0.7%. This data fell below the market’s expectations.
Traditionally, the second quarter should be the strongest quarter for the Chinese economy, with the market expecting GDP growth to range between 5% and 5.3%. However, the data indicates a bleak second quarter for the Chinese economy, with the overall macroeconomic situation still struggling.
“This data is quite in line with expectations,” Li Hengqing remarked. For example, Goldman Sachs has revised down its forecast for China’s full-year GDP growth from 5.0% to 4.9%, and Barclays has also lowered its forecast from 5.0% to 4.8%.
Li Hengqing explained that while international markets keep lowering their expectations for China’s economic growth, the actual decline still surpasses the predictions of many economic analysts. “But for those of us studying macroeconomics, this is not surprising; it fits our basic observations.”
He describes China’s current economic state as “losing momentum”: not actively slowing down by human intervention, but rather running out of fuel, with the speed gradually decreasing.
The domestic consumption situation in China is also an economic indicator garnering attention both domestically and internationally. The latest related data hits a new low this year.
The National Bureau of Statistics of the CCP reported that from January to June, the total retail sales of social consumer goods increased by 3.7% year-on-year, with only a 2.0% increase in June. This indicator is far below market expectations and hits a new low this year.
In November 2023, the year-on-year increase in total retail sales of social consumer goods was 10.1%, followed by a continuous decline to 7.4%, 5.5%, 3.1%, 2.3%. Although there was a slight increase in May (3.7%), June continued the downward trend from before.
In June, China’s consumer price index (CPI) rose by 0.2% year-on-year, with food prices falling by 2.1%. On average from January to June, the CPI increased by 0.1% year-on-year.
In response, Li Hengqing stated, “The ordinary people have no money, incomes are continuously decreasing, many young people are unemployed, and graduating from university means being jobless.” Therefore, people lack the ability to consume.
“Even governments at all levels are tightening their belts, at least on the surface. But if the ordinary people are truly tightening their belts, they cannot spend money recklessly as they did in the past.”
Recently, the CCP has introduced some policies to stimulate consumption. Regarding this, Li Hengqing mentioned that the CCP “is trying every means to empty the people’s pockets. Whether squeezing out or swindling money, it is for consumption, aiming to solve the so-called issue of GDP growth. The CCP is concerned not about the people’s livelihoods, but the GDP growth unrelated to the people.”
Li Hengqing cautioned that the CCP’s economic data is beautified, advising not to be blinded by these superficial numbers.
In the first half of the year, China’s real estate development investment reached 5.25 trillion yuan, a 10.1% year-on-year decrease. Specifically, residential investment dropped by 10.4%. This data has been continuously declining for over a year, falling from -7.9% in June 2023 to -10.1% in June 2024.
In the first half of the year, the area of residential construction by real estate development enterprises decreased by 12.0% year-on-year; residential new construction area dropped by 23.6%. The completed area of housing decreased by 21.8%. Sales area and sales revenue of new residential buildings have continued to significantly decline over the past year.
From January to June, the funds raised by real estate development enterprises decreased by 22.6% year-on-year, reflecting declines in domestic loans, foreign capital utilization, self-raised funds, down payments, and individual mortgage loans.
Currently, China’s new home sales prices are experiencing the largest drop in nine years.
To salvage the rapidly declining real estate market that poses a threat to the overall economy, the State Council of the CCP announced three major measures on May 17: significantly reducing down payment ratios, lowering provident fund loan rates, removing commercial loan rate restrictions, and setting up a 300 billion yuan reinvestment fund for affordable housing reinforcement.
In May, the Ministry of Finance of the CCP began issuing ultra-long-term special national bonds with a total amount of 1 trillion yuan for the year. Additionally, the authorities have implemented large-scale equipment upgrades and trade-in policies for consumer goods.
These measures aimed to promote economic growth and stimulate consumer spending have not yielded significant effects in the market, as the data continues to show an economic recession.
Particularly in the real estate sector, despite the CCP’s rollout of three major measures, the decline has not halted, and the market continues to accelerate its downturn.
Li Hengqing noted that in the latest CPI index, several important items such as commodities and real estate have seen significant decreases in prices. In many cities, the price drops for new and existing homes are substantial, with some exceeding 20% to 30%. In such circumstances, the CPI is bound to suffer.
The communique released at the Third Plenary Session of the CCP continues to emphasize strengthening the Party’s leadership and promoting the CCP’s style of “reform” and “modernization.”
Li Hengqing commented, “Xi Jinping’s approach is to have the Party lead everything.” He believes that China’s economic problems are fundamentally institutional problems. In over 40 years of the CCP’s “reform and opening up,” the core issue should be to resolve the separation of the Party and government, moving toward a society ruled by law and a free market. However, Xi Jinping seeks to reinforce the Party’s leadership in everything. Under this system, a large amount of capital flows out, talent and the wealthy flock abroad; this system forces everyone to take this path.