Recent remarks from Chinese supremo Xi Jinping signal a possible shift in the country’s economic approach, observers say, with the Chinese government possibly preparing for more aggressive measures in 2025.
Chinese President Xi Jinping visits a section of the Yellow River to learn about local measures to promote ecological conservation in the Yellow River basin, in Lanzhou, northwest China's Gansu Province, on Sep 11, 2024.
Mr Xi’s shift from a “more resolute ‘unwaveringly’ to somewhat more cautious ‘strive to accomplish’ suggests a recognition of the difficulties in achieving China’s 2024 growth targets but not a full admission that the target is unattainable,” said Mr Giovannini. He repeated it in July 2022 after a quarterly Politburo’s economic meeting, telling officials to"strive to achieve the best results possible".
“This is likely due to the economy’s structural soundness, with auto sales improving, employment stabilising, and high-tech industries outperforming,” Ms Guo said. “The leadership appears more focused on addressing long-term structural issues than hitting an exact GDP figure.” “These figures leave China in a very difficult position to meet its annual growth target,” Ms Guo added. The country would “need at least 4 per cent nominal growth in both retail sales and FAI to reach the real GDP growth target of “around 5 per cent,” she said.
UBS lowered its forecast for China's 2024 real GDP growth to 4.6 per cent from 4.9 per cent, Bank of America to 4.8 per cent from 5 per cent, and Nomura Securities is now looking at 4.5 per cent for 2024, and 4 per cent for 2025.“Provided the Chinese government increases investment and spending at the central level,” said Ms Su Yue, principal economist at The Economist Intelligence Unit .
Boosting domestic consumption, though, remains a critical focus for Beijing. Ms Guo from Hutong Research pointed to the government's"trade-in campaign" as a notable effort. But despite these efforts, Ms Su remains cautious about the outlook for consumption. The EIU forecasts China’s economy to grow by only 4.7 per cent this year, citing low private sector confidence and fiscal constraints at the local government level.
But the question remains - whether China will be able to sustain growth beyond 5 per cent without addressing the deeper issues in the real estate sector, experts say, which has struggled to regain its footing after years of rapid expansion and the subsequent regulatory clampdown. “From our point of view, as long as developers have the money to complete their existing projects, Beijing is not interested in saving the real estate sector.”
"The central government may act earlier and more decisively in 2025, possibly increasing fiscal spending or enacting further interest rate cuts,” said Ms Guo. “But if Beijing does not want to save its real estate sector, we probably cannot expect China to grow by more than 5 per cent next year." But for now, all hope is not lost. China “still has powerful policy levers”, said ICBC’s Matteo Giovannini, adding that fiscal and monetary tools could help spur growth.
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