China faces tougher challenges in achieving its economic goals in the second half of 2024

China set its annual growth target for 2024 at around 5 percent. After achieving growth of 5.3 percent in the first quarter, the rate slid to 4.7 percent in the second quarter. Acknowledging the “arduous” tasks China faces and reiterating the commitment to promoting development and maintaining stability in the second half of the year, the meeting highlighted the urgency of a recalibration of China’s economic strategy, suggesting that China will conduct adjustments to its economic policies and priorities.　

First, the meeting highlighted potential external and internal risks in the second half of the year. Externally, the US presidential election, shifts in the US Federal Reserve’s monetary policy and the Israeli-Palestinian conflict could have major spillover effects on China’s economy. Internally, weak domestic consumption and potential dangers in major sectors pose structural challenges. It suggested that China will adopt a more proactive macroeconomic policy in the second half of the year.　

Second, the meeting pledged to release a series of “ready, tangible and attainable reform measures.” Although China maintained considerable economic growth of around 5 percent in the past months, there has been a discrepancy between macroeconomic data and the micro-level experiences of the public. In the second half of the year, we can expect the government will focus on accomplishing both economic and social development.　

Third, the meeting stressed the importance of “counter-cyclical adjustments” and “more effective” macroeconomic policies. It pledged to specifically accelerate the issuance and usage of special bonds and promote large-scale equipment upgrades and trade-ins of bulk durable consumer goods. As the US is expected to start cutting interest rates in the second half of the year, the meeting said it is essential to maintain the basic stability of the yuan exchange rate at a reasonable and balanced level and that “various monetary policy tools should be comprehensively utilized.” It indicates that the government could adopt reserve requirement ratio cuts, interest rate cuts and other structural monetary tools in the following months.　

Fourth, stabilizing the real estate market was another focal point. Since mid-May, a new round of real estate easing policies has been introduced, including lowering interest rates on mortgages and reducing down payment ratios. Emphasizing the healthy development of the property sector, the meeting said that the government will continue to support the acquisition of existing housing stock for affordable housing and ensure the completion of ongoing projects. In the second half of the year, the government could release further policy measures, such as easing restrictions on home purchases in major cities and accelerating the renewal of existing housing stock.　

Finally, the meeting identified two policy priorities: boosting consumption and promoting innovation and future industries, to meet both short- and long-term economic goals. To achieve the former, the meeting highlighted the importance of new sources of consumption, such as cultural tourism, elderly care, childcare and domestic services. For the latter, the meeting stressed the importance of developing “gazelle enterprises” for the first time, which refers to fast-growing companies that exhibit high growth rates in terms of revenue or employment.　

As the meeting has set the tone for China’s economic policy, the coming months will be crucial in determining whether these policies can power a faster and stronger recovery of China’s economy.