- China has yet to see a pre-pandemic economic recovery, and that will be true in 2024.
- The Conference Board projected GDP growth to slow to 4.1% in 2024, down from an estimated 5.2% in 2023.
- Economists posit four reasons why China's economy will continue to struggle next year.
China's economy has yet to fully recover from the pandemic's severe lockdowns. According to the Conference Board's China Center for Economics and Business, the growth struggle will continue until 2024.
In what looked like a demand-fueled recovery in the first quarter of 2023, then debt-ridden real estate giants Evergrande and Country Garden failed, an aging population and youth unemployment weakened the labor market, and the country retreated. deflation.
Soft domestic and foreign demand for Chinese goods, a deteriorating job market and erosion of business profits due to low inflation dragged down second-quarter growth. GDP expansion was 0.5% on a quarter-over-quarter basis from 2.3%.
Then, in the third quarter, growth delivered another head-false with a higher tick. Although the Confidence Board expects that upward trend to continue through the end of the year, they say it is unsustainable and could lead to further recession in 2024.
The Board of Trustees predicts full-year GDP growth of 4.1%, down from the current estimate of 5.2% in 2023. Four key reasons why China faces below-trend growth in 2024 are detailed below.
1. Reduced stagnant demand
While China saw a substantial rise in consumption in the third quarter, it was driven by demand that the Conference Board expects to moderate in the coming months.
„Confidence remains weak, and there are currently no discernible developments that could signal a turnaround in sentiment,” the economists wrote in a report shared with Business Insider.
In their view, consumption has yet to return to a sustainable level, and Chinese citizens are concerned about their financial security and the labor market, as well as Beijing's policies.
2. The real estate slump isn't going away
Major Chinese property developers have gone bankrupt or declared bankruptcy this year, and efforts by authorities to stabilize the real estate sector have had little meaningful impact.
„The decline is structural and likely to be permanent,” the conference board said. „Chinese households have lost faith in property as a means of wealth accumulation. It is difficult to predict when the sector will stabilize; but, when it does, it will not become a major growth driver as it has been in previous decades.”
The property sector has yet to bottom out in economists' view, and Beijing will struggle to revive demand.
3. Foreign demand for Chinese goods is poised to decline
A global economic slowdown, led by recessions in the US and Europe, spells bad news for China.
Demand for China's manufacturing exports will continue to moderate in the new year amid a global slowdown, the Conference Board said.
„China cannot export a way out of the aggregate demand problem caused by the real estate slump,” economists noted.
4. Beijing cannot implement major stimulus, only incremental measures
As China's economy faces deep structural problems, in the Conference Board's view, any overhaul or massive stimulus package opens the door to disaster.
There is some room for policy to stimulate credit growth and investment, but greater intervention, greater economic inefficiency, and more likely to stimulate speculative investment.
„So far, the government has refrained from implementing a broad-based stimulus package,” economists said. „However, in recent months, the government has stepped up monetary and fiscal measures to stimulate 'targeted' investment, particularly in infrastructure for flood recovery and disaster prevention. As a result, the strong recovery momentum seen in Q3 2023 will dissipate. Growth will remain stable in 2024.”
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