The situation in China continues to be one that is challenging both for businesses in the country and foreign investor.
The Government has been focused on the “quality” of growth instead of the “quantity” of growth, and this has shifted their focus to more technologically advanced products. With this in mind, the Government, is leaning towards accepting a lower growth rate for the country and we’re likely to see the target at 5% again. This also means that as long as this target is achieved, the Government will not likely provide strong stimulus measures in the economy.
For China, this is technically recessionary as they’ve had an average growth rate of over 8% in the long term and leave the country in a vicious cycle of lower spending and exports leading to deflation and higher real rates.
Further, Xi has expanded his crackdowns against key industries into its fourth year, now targeting financials, energy companies, infrastructure and other industries that are critical to the growth of the Chinese economy. This adds to our concerns about the year ahead.
What We Cover
Economic Growth Outlook
The three pillars of the Chinese economic paradigm rely on are:
Real estate
Exports
Consumer spending
Yet all three remain rather challenged, and their fates interconnected. For one, many more affluent consumers have most of their wealth invested in Chinese real estate.
It’s the largest asset class in China, by far, and among the largest in the entire world for any single market type (whether stocks, or bonds, or real estate). Ten years ago, the property market added 2% - 3% to GDP growth and in 2023, it’s estimated to subtract -1.5%