China's economy 'hits the brakes' with Xi Jinping forced to take action

The figure fell well short of expectations after a particularly strong start to 2024.

Xi’s annual growth rate target is around five per cent but the latest figures sent shockwaves through Beijing.

Heron Lim, from Moody’s Analytics, said: “China’s economy hit the brakes in the June quarter.”

China’s economy is in an increasingly precarious position because of a prolonged property crisis, local government debt, weak consumption and high unemployment.

Xi has convened a meeting in Beijing, dubbed the Third Plenum.

Plenums have so far altered China’s fiscal policy, with Xi hinting at loosening the one-child policy in 2013 and Deng Xiaoping pursuing globalised trade flows in 1978.

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State-owned media outlets have suggested reform-focused policies are a priority.

However, Shanghai-based economist Dan Wang said: “There are more than 4,000 banks in China and over 90 per cent are smaller, regional banks which are highly exposed to the housing market and local government debt.”

Eswar Prasad, former head of the International Monetary Fund's China division, added: “A major concern is the loss of household, business, and investor confidence in the government’s ability to navigate the perilous economic environment.”

A number of key statistics show the difficulty facing the Chinese economy.

Producer prices continued to drop last month, with consumer prices rising by just 0.2 per cent.

Retail sales in June grew by just two per cent in June as statistics reflected a below-expectations bounce.

International trade flows also indicate an increasingly exacerbated situation, with a record trade surplus of £76.4billion.

Nations across the West have erected barriers to trade with China.

Tariffs have been imposed on goods made in China, stretching from electric vehicles to advanced chips.