Senior Chinese Communist Party officials have gathered in Beijing for a pivotal four-day meeting to address the future direction of the world’s second-largest economy. This “Third Plenum” of the 205-member Central Committee, led by President Xi Jinping, follows the announcement of lower-than-expected economic growth in the second quarter of 2024.

Official statistics revealed a growth rate of only 4.7% between April and June, falling short of the 5.1% forecast by Bloomberg analysts. This marks the slowest expansion since early 2023, when China was still recovering from its stringent zero-Covid policy. The National Bureau of Statistics described the external environment as “intertwined and complex,” noting that domestic demand remains weak and economic recovery needs strengthening.

Experts attribute China’s economic slump to both internal and external factors, including an aging population with reduced spending power and ongoing trade tensions with the United States and European Union. These foreign markets have imposed tariff barriers to protect their industries from subsidized Chinese goods, particularly in sectors like electric automobiles.

Domestically, the struggling real estate market continues to drag on the economy. Historically a significant growth driver, the sector now sees major property firms mired in debt and facing potential liquidation. Macquarie Group’s Head of China Economics, Larry Hu, pointed out that “property is the biggest drag” on domestic demand.

During the meeting, President Xi presented a work report, outlining a draft decision on comprehensively deepening reform and advancing Chinese modernization, according to state news agency Xinhua. While Xi hinted at “major” reforms, specifics were sparse.

Economist Harry Murphy Cruise from Moody’s Analytics suggested that the meeting might result in modest policy adjustments, such as expanding high-tech manufacturing and providing limited support to housing and households. The Communist Party’s official newspaper, The People’s Daily, tempered expectations by stating that “reform is not about changing direction and transformation is not about changing color.”

As the Third Plenum progresses, the world watches closely for any substantial policy changes that could revive China’s slowing economy and set new long-term economic goals.