1704260977
Chinese head of state Xi Jinping called on his compatriots to prepare for further economic challenges in the coming year. The statement has a cautious tone as a string of weak economic data highlights the many headwinds facing the world’s second-largest economy.
In his New Year’s message to the nation on Sunday, Xi Jinping said: “It is normal for there to be ups and downs on the road ahead.” He vowed to step up efforts to support economic growth and respond to the concerns of the people in terms of employment and the costs of living. He said: “Some businesses are under operating pressure and some people are struggling to find work and livelihoods.”
Xi Jinping emphasized the importance of the economy to the country’s political priorities, noting that China must “further strengthen development confidence and increase economic vitality” in 2024, the 75th anniversary of the founding of the Communist Party of China.
Just hours before Xi Jinping’s speech, Chinese government data showed new signs of weakness in the domestic economy, increasing pressure on Beijing to take potentially strong new measures to stimulate the economy in the coming year.
An official survey released on Sunday showed that manufacturing activity fell further in December as domestic and foreign orders tightened, and the services sector also struggled as consumer spending fell.
The construction sector is doing better thanks to a government-driven infrastructure plan, but overall the latest data suggests China will be in trouble after a series of disappointing data on prices, retail sales and private sector investment.
China’s economic growth experienced ups and downs last year. Currently, China’s leaders have signaled that they will provide greater support to the Chinese economy, suggesting that new fiscal stimulus and central bank support measures will be introduced in the coming months.
Several of China’s largest banks have announced plans to cut deposit rates in recent days, paving the way for subsequent cuts in lending rates for households and businesses.
Still, officials said stimulus measures would be measured rather than aggressive, reflecting their caution given already high debt levels. China’s economy is currently in a difficult situation, struggling not only with a protracted real estate downturn but also with external pressures from the global economy, which is plagued by war and slowing growth in the United States and Europe.
“What’s next? It could be another normal year,” predicted Rory Green, head of Asia economics at GlobalData.TSLombard, in a report on China’s economic outlook for next year. “Growth will not collapse, but it will not accelerate again either.”
China’s National Bureau of Statistics said on Sunday that China’s official manufacturing purchasing managers’ index (PMI) fell to 49 in December from 49.4 in November, remaining below the boom-bust line of 50 for the third straight month.
The result was below the 49.8 predicted in a Wall Street Journal economic survey. New orders at home and abroad continued to fall in a contracting range, while a measure of companies’ willingness to hire new workers fell to 47.9 from 48.1 in November, suggesting that China’s manufacturing sector, which is driving the economy drives, the effects of the global economy are felt by slowdown and domestic consumption. Weakness brings pressure.
China’s service industry business activity index was at 49.3, the same level as last month, suggesting consumers are still cautious about consumption despite concerns about employment and the real estate market.
After strict anti-epidemic lockdown measures severely hit economic growth in 2022, there was optimism earlier this year that China’s economy would regain vitality in 2023.
As the Federal Reserve has sharply raised interest rates to curb inflation, U.S. economic growth has slowed, and people had expected a recovery in China’s economy to provide momentum to the global economy.
Ultimately, US consumers with large savings helped the US economy maintain good growth despite rising borrowing costs, while China’s performance was disappointing.
The expected consumer boom in China is not happening. China’s real estate industry is in turmoil, with many residential buildings still unfinished and many developers in trouble. This situation has weakened consumers’ desire to buy and households have turned to saving. China’s export growth has slowed as Western consumers become less inclined to make further purchases after a shopping spree during the epidemic. In addition, real estate investments fell significantly.
China’s real estate market remains in a deep downturn. On Sunday from China Real Estate Information Corp. Privately released data showed the Chinese property giant’s new home sales fell 35% year-on-year in December 2023.
According to CRIC, China’s 100 largest real estate companies sold a total of approximately $63.4 billion in residential real estate in December 2023. That’s 16% more than total November sales, but December sales have historically been higher because developers typically book as much revenue as possible before the end of the year.
The top 100 real estate companies sold a combined $760 billion in homes in 2023, down 16% from the previous year. According to CRIC, the total revenue of the top 100 real estate companies in 2023 will account for less than half of the total revenue in 2021.
A clear sign of China’s difficulties last year was the stubbornly high youth unemployment rate, which topped 21 percent in June before the National Bureau of Statistics announced it would stop publishing the data.
Another sign is deflation. Both consumer prices and producer prices were lower in November than in the same period last year. China’s weak price growth contrasts with the strong inflation experienced by most other countries last year.
Still, China’s economy is still expected to grow by about 5% in 2023, better than in 2022 but slower than growth rates common in the years before the COVID-19 epidemic.
Many economists have slightly weaker expectations for next year as the economy in 2023 will benefit from a favorable basis for comparison in 2022, when lockdowns in major cities such as Shanghai and Shenzhen hit economic growth.
For example, the International Monetary Fund (IMF) forecasts that China’s economic growth will slow to 4.6% in 2024 from an expected 5.4%.
The Chinese government has so far opted for broad but selective stimulus measures, including modest interest rate cuts, easing home purchase restrictions in some major cities and other small measures, to lay a foundation for economic growth.
The approach reflects Chinese Communist Party leadership’s reluctance to adopt large-scale stimulus measures since an economic surge in 2008 sparked a housing bubble. Chinese leader Xi Jinping said he was reluctant to use Western-style relief to boost demand, preferring to focus on building roads and factories.
In a speech on Sunday, Xi Jinping signaled he would stay the course, pledging to push forward “China-style modernization” – a slogan that sums up his vision of state-led economic development.
He also suggested the government would pay more attention to youth employment, childcare and pension costs.
“Everyone is very busy and under great pressure at work and in their personal lives,” Xi Jinping said. “We need to create a warm and harmonious social atmosphere… create comfortable and comfortable living conditions.”
#Jinping #wind #rain #normal #latest #data #shows #Chinas #economic #recovery #weak #Wall #Street #Journal