After the publication of the Chinese growth during the 2^nd quarter, and according to the consultation of the international medias or of the Chinese newspapers, we are worry or reinsured. The international press notes that the 1^st estimation of the GDP growth (4.7% year on year) is in retreat compared to the 1^st quarter one (5.3% year on year) and sees there a sign of an important slowing which is the consequence of the structural problems the country is confronted with. To the opposite, the Chinese Daily News is satisfied because growth during the 1^st half of the year was 5%, in exact conformity with the official objectives for year 2024. China GDP during these 6 months reaches 8 500 billion dollars.

So, who to believe? Both are right because if half-year figures constitute an average of the evolution of the economic activity since the beginning of the year, the quarterly figures show a slowing and it is not without legitimacy to ask if this slowing will be confirmed in the future and will lead to a growth significantly lower than in the past or if it is only a temporary phenomenon resulting from a basis effect provoked by a 1^st quarter very favorable. The Plenum of the Communist Party central Committee had a meeting last week and its decisions will be analyzed with a lot of interest because they will give the opportunity to know the diagnostic of the Chinese authorities.

The analysis of the Chinese growth components during the first half allows to better appreciating the situation. It is undisputable that interior demand is weakening. There is first the real estate crisis which heavily affects the construction sector. Housing starts fell by 23.7%. The production fell during the 1^st half by 10% but the end of this fall in June let us think that the adopted measures at the beginning of the year are starting to produce results. This crisis weights on the local authorities finances whose resources come from the lands sale. The State has adopted the necessary measures in order that the failure of several major real estate companies do not put into danger the main Chinese banks which would start a crisis like that one the United States have known with the sub-primes. A reduction of the initial cash demanded to household who want to buy their home has also been announced.

Investment, which has only grown by 3.9% during the 1^st half is not anymore as in the past a supporting factor of the activity. Enterprises are confronted with a slowing of the world growth and they are starting to invest in foreign countries, especially in South-East Asia, to satisfy the local demand. Chinese subsidiaries of the major international groups have reduced their projects due to the new Chinese competitors, especially in the car industry.

The most worrying point is the change of consumers behavior, which has leaded to the fact that consumption does not anymore constitute the main growth engine with a 3.7% increase during the 1^st half. Months after months, retail sales slow and we see an increased preference of the population for services (+7.5%) which has incited the authorities to adopt supporting measures in favor of a large set of goods, like cars with the softening of the local regulations   to obtain a registration.

Despite the slowing of the interior demand, industrial production has resisted with a 5% growth during the 1^st half thanks to the development of exports with a 6.9% growth. The volume of foreign exchanges has beaten a record with near 3 000 billion dollars and a near 100 billion dollars trade surplus in June. Chinese industry has been successful in compensating a lower growth of local consumption of manufactured goods by an increase of their international market shares. But a multiplication of the protectionist measures will slow this trend and mainly incite Chinese enterprises, to overpass them, to invest to produce in the related countries, which will reduce their contribution to the country growth. 

In reality, China is not any more an emerging country and even less a developing country. It is now confronted with the same challenges than these developed countries have met in the past. It is a new situation and it is to these challenges its authorities will have the mission to give the right answers. It is likely that the meeting of the Plenum leads to a first set of measures but they definitely won’t be the last ones.

The first challenge is the demography and it has long-term consequences. The second one is about inequalities between major cities and the territories. One of the main engines of Chinese growth was, during the past, the rural migrations with millions of inhabitants each year going into cities where they found jobs and a spectacular improvement of their level of life which was financing their consumption and so growth. The revenue spread is still very high between urban and rural regions, sometimes above two. But the transfer of population is lower due to   activity slowing and so the number of offered jobs.

The unemployment rate in urban zones is 5%, according to official statistics and they would have near 10 million “migrants” in the cities who are looking for a job, which is another factor hurting growth. When one of the major successes of the Deng Xiaoping era was the sharing of the prosperity, the young generations were saving to allow their parents remained in their villages to having, them too, an improvement of their life level, the increase of the inequalities is putting this model into question. For reasons as political as economic, the Chinese government must remedy to that.

To the differences of the other developed countries, its financial situation is good. Inflation is very low as the interest rates level. China has accumulated huge foreign currencies reserves and the State indebtedness ability is much superior to that one of the developed countries. Resources so exist to launch a demand-side policy which, through the purchasing power increase, mainly in rural territories, can contribute to reduce inequalities and to stimulate activity in order to the 5% growth objective will be reached. That would be a level by far superior to that one of the other main economies.

China also must keep its policy in favor of the financial markets, indispensable tools for its enterprises to find financing conditions comparable to these their competitors have and are not obliged to go to New York or to Singapore for their listing. The connection between Shanghai and Hong Kong is improving but the strategy decided near now fifteen years ago, of the Yuan internationalization, is still far from having given to the Chinese currency the place that would have the currency of second largest economy in the world.

The agenda of the Chinese authorities in order the country reaches its objectives is so well furnished and, finally, few different from these of the other developed countries. But it is a new situation for the political authorities which have not yet a full experience of the definition and of the puting into practice of an economic policy which is adapted  to a tense international environment.