FX.co ★ China's economic outlook 2024: navigating challenges in consumption, real estate, and foreign investment

In a recent forecast by the Conference Board, China's economic growth prospects appear muted for this year, diverging from a trajectory of robust expansion. This anticipated slowdown, though notable, is not seen as a major crisis, given China's capacity for long-term recovery. Despite this resilience, there is a sense of apprehension among Chinese policymakers in the face of impending economic uncertainties.

The economic outlook, as analyzed by industry experts, suggests China may struggle to regain its pre-pandemic economic vigor. Projections indicate a deceleration in GDP growth to 4.1%, a significant decrease from the previously expected 5.2% in 2023.

Analysts from the Conference Board have pinpointed four primary factors likely to influence this downturn in China's economic figures:

1. Reduced demand

China experienced a surge in consumption in Q3 of 2023, unlocking pent-up demand. Yet, analysts foresee a notable contraction in this demand in the forthcoming months. The projected decline is attributed to weak consumer confidence and widespread dissatisfaction with the demand for various goods and services. Presently, the financial security of Chinese citizens is under strain. The precarious state of the job market, coupled with Beijing's current monetary policies that necessitate reduced spending, exacerbates this situation. Consequently, the Chinese are increasingly inclined towards saving rather than spending.

2. Persistent downturn in real estate

Projections for 2024 indicate a continuing downturn in China's property market. The sector has been rocked by bankruptcies and defaults among major developers, and government efforts to stabilize the market have so far been fruitless. The Conference Board's experts point out that Chinese households have lost faith in real estate as a reliable savings vehicle. This shift in sentiment is a critical factor in the ongoing slump in the housing market.

3. Ebbing foreign investment demand for Chinese products

The Conference Board anticipates a marked slowdown in foreign investment demand for Chinese products. This trend aligns with the broader global economic downturn, particularly in the United States and Europe, posing a significant risk to China's export-driven economy. As a result, experts predict a substantial reduction in China's export capabilities in 2024, potentially impacting the country's trade balance.

4. Selective stimulus measures over broad economic support in China

China faces challenges in deploying widespread economic support measures due to its deep-seated structural issues. The Conference Board underscores the improbability of China implementing a massive stimulus package in the current situation. Experts caution that escalated lending stimulation and increased investment could undermine economic efficiency, leading to diminishing returns for the Chinese economy. Consequently, the Chinese government is currently opting for more targeted, restrained stimulus initiatives rather than a comprehensive economic stimulus package.