China’s Economic Engine Stalls: GDP Growth In Guangdong Lags Far Behind National Average In First Half Of 2024

Guangdong, China’s largest provincial economy, has significantly lagged behind the national GDP growth average in the first half of the year, raising concerns about its role as an economic driver despite Beijing's calls for key regions to boost their contributions.

The Southern Chinese province's GDP grew by 3.9 per cent in the first half of 2024, trailing the national average by 1.1 percentage points, yet it remains the country’s largest regional economy.

In the first quarter, the province saw a growth rate of 4.4 per cent.

Beijing had last week reiterated its commitment to achieving an annual national growth target of “around 5 per cent” in a communique following the third plenum, an important economic policy meeting, days after reporting a lower-than-expected growth of 4.7 per cent for the second quarter.

Authorities in Coastal regions, known for their industrial and trade prowess, are taking measures to enhance economic activity and support the national economy.

Guangdong, historically a top performer, is under considerable pressure to deliver.

Analysts attribute the subdued growth to weak investment, low consumption, poor business sentiment, and ongoing issues in the property sector.

Guangdong’s services sector output increased by 2.7 per cent in the first half of 2024 compared to the previous year, while retail sales rose by only 1.2 per cent.

A 16 per cent drop in property sector investment and a 30.6 per cent fall in home sales led to a 1.5 per cent decline in Guangdong's overall fixed-asset investment from January to June.

Evergrande, the world’s most indebted developer, is headquartered in Guangdong.

Peng Peng, executive president of the Guangdong Society of Reform think tank, stated that the wider contraction in the property market has adversely impacted Guangdong, especially its private sector, and this trend is likely to continue, according to a SCMP report.

The fall in fixed asset investment reflects reduced confidence among businesses, leading them to refrain from investing, according to Peng.

Some cities in Guangdong, like tech hub Shenzhen, have managed to defy the trend, posting a strong growth rate of 5.9 per cent for the period. This has helped mitigate the weaker performance of other major cities like Guangzhou, the provincial capital.

However, retail sales of consumer goods in Guangzhou and Shenzhen were lacklustre, with year-on-year growth rates of just 2 and 1.8 per cent respectively during the period.

Exports remain a key pillar supporting Guangdong’s growth, with foreign trade increasing by 13.8 per cent year on year.

Home to tech giants Huawei and Tencent, electric vehicle maker BYD, and state-owned carrier China Southern Airlines, Guangdong’s economy grew by 4.8 per cent in 2023, reaching 13.6 trillion yuan (US$1.9 trillion), comparable to the economies of Australia and South Korea, and leading all Chinese provinces in GDP for 35 years.

However, the province is under increasing pressure to maintain its lead.

Guangdong’s growth has lagged behind other leading regions, with Zhejiang, Jiangsu, and Shandong provinces all reporting growth rates exceeding 5.5 per cent for the first half of 2024.

As of Thursday (25 July), 23 provinces and regions have published their growth data for the first half of the year.

Among these, 16 regions, including Guangdong, the Xinjiang Uygur autonomous region, and Hainan, failed to meet their targets and underperformed compared to the national average.

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