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| According to Bloomberg news agency, China is almost certain to achieve its growth target of about 5% for the whole of 2023. (Source: China Daily) |
Among them, the most "prominent" issues of concern are whether the world's second largest economy can avoid the risk of deflation and whether the housing crisis and declining consumer confidence that have lasted over the past year will derail efforts to create growth momentum this year.
Economic data, due for release on January 17, is likely to show China's gross domestic product (GDP) growing 5.2% for the full year of 2023, although growth in the fourth quarter of 2023 appears to have lost some momentum compared to the previous quarter.
China's retail sales and industrial output improved significantly in the final month of 2023. But Asia's largest economy entered 2024 with mixed news. The latest data released on January 12 showed that the consumer price index (CPI) in December 2023 fell for the third consecutive month, marking the longest streak of monthly deflation since 2009. However, for the whole of 2003, China's CPI still increased slightly by 0.2%, the slowest pace since 2009.
While the producer price index (PPI) fell 3.0% for the year, marking the sharpest decline since 2015. But exports are showing signs of stabilizing, although they fell throughout 2023 for the first time since 2016.
“The recovery in domestic demand will be slow and bumpy as targeted stimulus is trickled down through investment. Moreover, the recovery in assets will be extremely slow,” said Dincan Wrigley, chief China economist at Pantheon Macroeconomics.
The People's Bank of China (PBoC) is scheduled to meet on January 15. Most economists surveyed by Bloomberg expect the PBoC to cut the interest rate on its one-year policy loans by 10 basis points to 2.4%. At the same time, many experts said there is a possibility that Chinese policymakers will decide to inject more money into the country's financial system.
That may not be enough to overcome all the difficulties and challenges facing the world’s second-largest economy, but economists believe there are more steps to be taken to boost growth. For example, the PBoC will cut the reserve requirement for commercial banks and the Chinese Ministry of Finance is considering plans to expand financial support, after signaling an increase in government spending.
Bloomberg economists say the PBOC will start the New Year with a rate cut as soon as its first meeting of 2024. Recent economic data has been weak, giving policymakers good reason to consider stepping up support.
Economists at Societe Generale SA forecast China will achieve economic growth of 4.5% for the full year of 2024, assuming the government increases fiscal stimulus and loosens monetary policy, exports grow steadily and the housing sector receives ample support.
“If the Chinese government is willing to step up fiscal policy more than we currently forecast, growth in 2024 could be 5%,” said Yao Wei, chief economist and head of Asia-Pacific research at Societe Generale SA.
(according to Bloomberg)
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