BEIJING — China’s economy, while still growing, has seen a slowdown, recording a 4.8% growth rate in the third quarter, marking the slowest momentum in a year. This development aligns closely with expectations set by analysts amidst the continuing downturn in the real estate sector and overall investment caution across the nation.

The contraction of fixed-asset investment by 0.5% during the first nine months of the year has raised alarm, especially as spending on essentials like infrastructure and manufacturing decelerated sharply. Analysts had forecasted only a slight growth of 0.1%. Additionally, the real estate industry is suffering greatly, seeing a 13.9% investment decline from last year, exacerbating concerns about the broader economic outlook.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, described the drop in fixed-asset investment as “rare and alarming,” expressing fears that the GDP growth may face significant downward pressure in the fourth quarter. Notably, this marks the first such contraction since the economic disruptions of 2020, illustrating the dire state of China’s economic recovery.

Experts predict that the sluggishness in real estate investment may be a longer-term issue, with Bruce Pang, an adjunct associate professor at CUHK Business School, suggesting that China may need to stimulate investment in other sectors to compensate for the diminishing returns from real estate. The encouraging news of a 6.5% rise in industrial production in September indicates potential pockets of resilience in the economy, yet private sector investment remains feeble, rising by only 2.1% over the year.

Consumer spending in China also reflects a degree of caution among its populace, with retail sales seeing a modest growth of just 3% in September — consistent with analyst forecasts, yet a drop from previous months. This hesitance may stem from a lagging consumer goods subsidy program, which previously fueled demand, especially for home appliances.

In reaction to this economic backdrop, experts like Dan Wang from Eurasia Group express skepticism on whether domestic demand can be properly stimulated without first stabilizing the housing market. Although urban residents saw a 4.5% increase in disposable income, this growth appears muted against declining confidence in economic policies and future growth prospects.

As the country navigates these economic challenges, a significant meeting featuring China’s top leaders is underway to deliberate on policy directions for the next five years. The focus appears to be shifting toward fostering domestic consumption and advancing technological independence in response to increasing international tensions, particularly with the U.S.

Nomura Chief China Economist Ting Lu emphasizes the necessity of boosting investments in technology while also highlighting the continued need for the “old economy,” particularly real estate. This sector, deemed crucial for economic stability, remains a substantial revenue generator for local governments. The challenge remains whether China can reset its investment strategy effectively while managing existing overextensions in new industries.