ANALYSTS upgraded their forecast for China’s growth this year after a better-than-expected performance in the first quarter – but they see more signs that the world’s second-biggest economy will struggle to escape from deflationary pressures.
Gross domestic product is now projected to expand 4.8 per cent, according to the median estimate in a Bloomberg survey of economists. That’s up from a 4.6 per cent forecast in last month’s poll, and a tad closer to the government’s goal of around 5 per cent.
Inflation forecasts were lower than in the March survey, pointing to a lasting weakness in household spending after a property crash. Consumer price inflation is now seen averaging 0.6 per cent in 2024, down from 0.8 per cent. Industrial prices are expected to fall at an average 0.6 per cent pace, double the March prediction.
The Chinese economy enjoyed a surprisingly strong start to the year, bolstered by overseas demand for its manufactured goods and Beijing’s push to develop advanced technologies. But much of the bounce came in January and February. Consumption lost momentum in March and the housing slump deepened – pointing to challenges for the rest of 2024 that may require more stimulus to address.
“Real estate and its upstream and downstream sectors are shrinking across the board, constantly driving down social expectations as well as overall demand,” said Nie Wen, chief macro analyst at Hwabao Trust. “Government investment is urgently needed to stabilise or boost demand.”
The property downturn poses the biggest risk to China’s growth this year, according to nine of the 15 economists surveyed, while four said low inflation and weak domestic consumption are the biggest concern. There was a similar split on how Beijing should respond, with measures to bolster real estate investment topping the list, followed by an acceleration in public spending.
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Local governments in particular have been cutting back their outlays because many are grappling with a debt crisis. After years of rampant off-balance-sheet borrowing, they are now getting hit by falling income from taxes and land sales.
Beijing has announced plans to step up central government spending as an offset. But government bond issuance has been slower than expected, partly because authorities were still looking for ways to invest the funds they raised last year, amid a lack of qualified projects.
Officials have indicated that debt sales could pick up in the coming months, opening the way for a fiscal boost. The National Development and Reform Commission, China’s top economic planning agency, said Tuesday that authorities have finished screening projects requiring a total investment of 5.9 trillion yuan (S$1.1 trillion) that qualified for special local bond funding. The commission called it a “solid foundation” for using the 3.9 trillion yuan of those bonds that are due to be sold this year.
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The Communist Party’s most senior 24 leaders are expected to convene later this month at the Politburo meeting, which is closely watched by investors for clues to how economic policy may shift in the coming months.
Other highlights of the survey:
The median forecast for year-on-year GDP growth in the second quarter is raised to 5.3 per cent from 4.9 per cent in the previous poll.
Exports are expected to expand 3.4 per cent this year, vs 3 per cent. Import growth outlook is maintained at 2.6 per cent.
Retails sales are now estimated to increase 5.5 per cent this year, vs 5.7 per cent.
Fixed-asset investment is forecast to rise 4.8 per cent in 2024, vs 4.6 per cent.
The People’s Bank of China (PBOC) is seen lowering its reserve requirement ratio by 25 basis points in the current quarter, a cut that was previously not expected till the third quarter.
The PBOC is seen lowering the rate on its medium-term lending facility by 10 bps before the end of June, then another 10 bps in the fourth quarter. BLOOMBERG
FAQs
China's 2024 growth outlook raised to 4.8% but deflation risk lingers. Analysts upgraded their forecast for China's growth in 2024 after a better-than-expected performance in the first quarter – but they see more signs that the world's second-biggest economy will struggle to escape from deflationary pressures.
What is the forecast for China economy in 2024? ›
Sept 16 (Reuters) - Goldman Sachs and Citigroup have lowered their full-year projections for China's economic growth to 4.7%, after the world's second-largest economy's industrial output slowed to a five-month low in August.
Is China at risk of deflation? ›
China's core inflation cooled to the weakest in more than three years, fueling calls for greater efforts to boost household spending as weak demand puts the annual growth target under pressure.
Is China's growth story coming to an end? ›
In an article for China Leadership Monitor last weekend, Rhodium Group partner Logan Wright said that while China is still growing faster than many other countries, its global influence probably peaked in 2021. That's when it reached 18.3% of world GDP, before dipping to 16.9% in 2023.
Is growth in China soaring or slowing? ›
China's Economy Slowed Last Quarter as Weak Consumer Demand Dragged on Growth. The second quarter's 4.7 percent growth was far below the 5.3 percent pace seen in the first quarter of 2024.
What is Goldman Sachs prediction for China in 2024? ›
Goldman Sachs on Monday (Jul 15) lowered its forecast for China's 2024 gross domestic product to 4.9 per cent from 5.0 per cent after data showed that the country's economy had slowed in the second quarter.
What is the Chinese forecast for 2024? ›
The year 2024 foresees luck and abundance in your professional and academic life. But you should be aware of those who might be jealous of you or want to take credit for your efforts. Singles will likely be caught in a whirlwind romance. Healthwise, be careful not to rush and make mistakes.
Will China overtake the US economy? ›
Some analysts even argue that China's economy may never surpass that of the United States. When considering further the vast soft power and geopolitical advantages the United States holds over China, it appears unlikely that China will displace the United States as a leading global power in the foreseeable future.
Is China in trouble economically? ›
Simply put, in many crucial economic sectors, China is producing far more output than it, or foreign markets, can sustainably absorb. As a result, the Chinese economy runs the risk of getting caught in a doom loop of falling prices, insolvency, factory closures, and, ultimately, job losses.
Is the US economy growing or declining? ›
US gross domestic product (GDP) increased 1.9% in 2022 and another 2.5% in 2023. GDP reached $27.4 trillion in 2023. The increase in real GDP (or GDP adjusted for inflation) was primarily due to increased consumer spending, nonresidential fixed investment, government spending, and exports.
The United States pays interest on approximately $850 billion in debt held by the People's Republic of China.
Which country has the best economy in 2024? ›
Why does China want to take Taiwan? ›
In this era of strategic competition, no strategic goal is more ambitiously anticipated, than the annexation of Taiwan. This feat would establish President Xi's standing in Chinese history and enable him to consolidate power as a crucial element of the middle kingdom would be accomplished.
What will be the economy of China in 2025? ›
"China's economic growth is projected to remain resilient at 5 per cent in 2024 and slow to 4.5 per cent in 2025," the global lender said in a statement wrapping up its annual assessment of the world's second-biggest economy for 2024. "Strong Q1 GDP data and recent policy measures" drove the upgrades, it added.
What is the future of China's economy? ›
The IMF report's longer-term assessment was less optimistic. It said it expected China's annual economic growth to fall to 3.3% by 2029 due to the rapid aging of its population and slower growth in productivity as well as the protracted difficulties in the housing sector.
What are the economic projections for 2024? ›
Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025. Services inflation is holding up progress on disinflation, which is complicating monetary policy normalization.
What is the projected inflation rate in China in 2024? ›
In August 2024, the monthly inflation rate in China ranged at 0.6 percent compared to the same month in the previous year. Inflation peaked at 2.8 percent in September 2022, but has eased recently. The annual average inflation rate in China ranged at 0.2 percent in 2023.
