TLDR:
- China’s economy predicted to grow 4.8% in 2024, missing government target
- Q3 2024 GDP growth expected to slow to 4.5%, weakest since Q1 2023
- Government ramping up stimulus measures to boost economy
- Analysts expect further monetary easing and fiscal stimulus
- Inflation remains low, with consumer prices forecast to rise 0.5% in 2024
China’s economy is facing challenges as growth rates slow and inflation remains low. A recent Reuters poll of economists predicts that China’s economy will grow by 4.8% in 2024, falling short of the government’s target.
This forecast comes as the country’s economic expansion continues to decelerate, with third-quarter growth in 2024 expected to hit 4.5%, the weakest performance since early 2023.
The Chinese government has set an ambitious growth target of around 5% for 2024. However, achieving this goal is becoming increasingly difficult due to various factors affecting the economy. The main pressure appears to be coming from the consumption side, which is closely linked to deflationary pressures.
In response to these economic headwinds, Chinese authorities have been implementing a series of stimulus measures since late September 2024. These efforts aim to revive the flagging economy and ensure that growth reaches the government’s target. The measures include both monetary and fiscal policies designed to boost economic activity.
On the monetary front, the People’s Bank of China (PBOC) has taken aggressive steps to support the economy. These include interest rate cuts and a substantial liquidity injection of 1 trillion yuan. The central bank has also introduced measures to support the property and stock markets, which have been areas of concern for the economy.
Analysts expect further monetary easing in the coming months. The Reuters poll suggests that the PBOC may cut the one-year loan prime rate, which is the benchmark lending rate, by 20 basis points in the fourth quarter of 2024. Additionally, a reduction in banks’ reserve requirement ratio (RRR) by 25 basis points is anticipated.
On the fiscal side, the Chinese government is planning to increase debt to stimulate growth. The finance minister has pledged to “significantly increase” debt levels, although the specifics of the stimulus package have not been fully disclosed. Reports suggest that China may raise an additional 6 trillion yuan (approximately $850 billion) from special treasury bonds over three years to bolster the economy through expanded fiscal stimulus.
Despite these efforts, economic forecasts remain cautious. The Reuters poll indicates that growth could further slow to 4.5% in 2025, highlighting the ongoing challenges faced by the Chinese economy.
One of the key concerns is the persistent low inflation rate. In September 2024, consumer inflation unexpectedly eased, while producer price deflation deepened. This situation puts additional pressure on Beijing to take steps to stimulate demand, especially as exports lose momentum. Analysts project a modest 0.5% rise in consumer prices for 2024, well below the government’s target of around 3%.
The property sector, a traditional driver of Chinese economic growth, continues to face difficulties. The prolonged property crisis has contributed to the overall economic slowdown and remains a significant challenge for policymakers.
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