China’s economy on track for solid recovery
BEIJING.— China’s economy is on track for a solid year with strengthening recovery momentum, fuelled by reviving consumer spending, services activity and export growth, said global financial institutions and senior experts.
However, the outlook could be vulnerable to the significant challenges of a lingering property downturn and lagging demand, they warned, underscoring the pressing need for and the rising possibility of more easing in macroeconomic policies.
Anticipated measures include interest rate cuts possibly as early as this month, fiscal expansion of the central government and fresh funding support for real estate developers, they added.
Wang Tao, chief China economist at UBS Investment Bank, said yesterday that China’s economic momentum is expected to further stabilise and recover this year, thanks to reviving consumer spending as the services sector and labour market further recover from the impact of COVID-19.
Exports are also likely to pick up amid improving global demand for electronics and technology products, Wang said, adding that the weak property sector’s drag on the economy may narrow as real estate development investment may stabilize and pick up in the second half of the year.
“If the property sector cannot be stabilized and it further slides, housing prices will see deeper corrections, which will worsen household confidence. This could be the biggest economic downside risk this year,” she said.
China’s economic activity picked up in November as export growth turned positive, while retail sales, services activity and industrial output accelerated. However, the property sector remained weak, with real estate development investment down 9.4 percent year-on-year in the first 11 months of 2023.
Yao Wei, chief economist and head of research for Asia Pacific at Societe Generale, said that policymakers should provide real estate developers with more funding support to help address their debt stress. Assuming more policy relaxations in the housing sector, stepped-up fiscal support and further monetary easing moves, the Chinese economy could achieve a stable growth of 4.5 percent this year, Yao said.
The tone-setting Central Economic Work Conference, held in December, decided to ensure stable and sound development of the real estate market, and strengthen macroeconomic adjustments as part of the efforts to consolidate and promote the positive momentum of economic recovery.
Zou Lan, head of the PBOC’s monetary policy department, told Xinhua News Agency that the central bank will use a comprehensive set of tools, including the medium-term lending facility and banks’ required reserves, to provide solid support for social financing and credit expansion.
Li Daokui, head of the Academic Center for Chinese Economic Practice and Thinking at Tsinghua University, said that China is expected to achieve around 5 percent growth in 2024 and reverse the economic slowdown seen in more than 10 years, “under the premise that the government adjusts and implements policies in a timely manner”.
It is time for policymakers to adopt a more proactive stance, so that macroeconomic policies effectively prevent noneconomic policies from causing any restrictions on economic activity, Li said at the 46th Tsinghua University Forum of China and the World Economy, hosted by the think tank.
At the same forum, Xu Gao, chief economist at BOC International, said that tepid demand remains the biggest challenge for the Chinese economy amid the lingering property downturn, suggesting that the central government should take on more debt to fund infrastructure investment and shore up demand.