China’s economic landscape is poised for a growth trajectory of approximately 4.8% in 2024, a figure that falls short of the government’s projections. Furthermore, forecasts suggest a potential decline to 4.5% in 2025, intensifying the need for policymakers to explore additional stimulus measures to invigorate the economy.
In the third quarter, China’s gross domestic product (GDP) is anticipated to have experienced a modest rise of 4.5% compared to the same period the previous year, a slight deceleration from the 4.7% growth recorded in the second quarter. This slowdown marks the weakest growth rate since early 2023, according to insights from a recent Reuters poll conducted between September 27 and October 15.
Since late September, authorities have significantly increased policy stimulus efforts in an attempt to revitalize a slowing economy, striving to hit the government’s target growth rate of around 5% for this fiscal year. According to financial strategist Xing Zhaopeng from ANZ, the primary pressure point appears to be on the consumption side, which is closely tied to prevailing deflationary trends. While Xing anticipates a boost in economic activity in the fourth quarter driven by new stimulus initiatives, he has set his own growth estimate for 2024 at 4.9%.
Historically, China has maintained an impressive record of meeting its economic targets, with the last notable miss occurring in 2022 due to pandemic-related disruptions, resulting in a subdued growth rate of just 3%, significantly below the anticipated 5.5% target.
As part of the economic monitoring process, the government is scheduled to release key data on third-quarter GDP, retail sales, industrial production, and investment figures on October 18 at 02:00 GMT.
The current poll reflects a generally negative outlook, especially in contrast to previous predictions made in July, where economists estimated a growth rate of 5.0% for 2024. Among the 75 economists who contributed to both the July and October polls, over half (57%) have downgraded their growth forecasts for this year, while 32% have chosen to maintain their prior estimates.
Despite the recent monetary measures taken, GDP forecasts for the upcoming years show little sign of improvement, highlighting a deep-rooted pessimism in growth prospects amid an ongoing property crisis.
Analysts and investors are anticipating a forthcoming meeting of China’s National People’s Congress, where more detailed stimulus plans are expected to be unveiled. Forecasts indicate that the world’s second-largest economy may see its growth slow further to 4.5% in 2025, a figure that remains unchanged from the July poll.
Significantly, China’s finance minister recently committed to “considerably increasing” debt levels to reinvigorate economic momentum, although the overall dimensions of this stimulus package remain ambiguous. Reports suggest China may issue an additional 6 trillion yuan (approximately $850 billion) in special treasury bonds over three years as part of an initiative to bolster its faltering economy through enhanced fiscal support.
Last month, announcements of a plan to issue around 2 trillion yuan in sovereign bonds for this year were part of an effort to implement fresh fiscal stimulus.
In September, the central bank introduced its most aggressive monetary support measures since the outbreak of COVID-19, which included interest rate reductions and a substantial 1 trillion yuan liquidity injection to stabilize the property and stock markets. Analysts predict that, within the fourth quarter, a reduction of 20 basis points in the one-year loan prime rate—the benchmark lending rate—is likely, along with a 25 basis point decrease in banks’ reserve requirement ratios.
Additionally, the People’s Bank of China is expected to cut its seven-day reverse repo rate, an essential policy tool, by 20 basis points in the first quarter of 2025, following a recent 20 basis point cut on September 27. In September, China experienced an unexpected easing in consumer inflation, coupled with an increase in producer price deflation, fueling pressures on the government to stimulate demand as export levels decline.
According to estimates from the latest Reuters poll, China’s consumer prices are projected to rise by only 0.5% this year, falling significantly short of the government’s target of around 3% before picking up to around 1.4% in 2025.
With critical economic indicators on the horizon, the global economic community remains attentive to China’s fiscal strategies as the nation endeavors to navigate through these challenging waters. The focus remains steadfastly on consumption-driven growth and the economic policies that will shape China’s financial landscape in the coming years.