China’s economy is in need of stimulus as government support remains delayed, impacting growth and consumer demand.
Beijing: China’s economy is still waiting for that promised government support. Investors are getting a bit anxious since they haven’t seen the turnaround they hoped for.
Since late September, the government has cut interest rates and hinted at stimulus plans. But the juicy details? Those won’t come until March during the annual parliamentary meeting. Official GDP numbers for 2024 are expected soon, too.
BlackRock Investment Institute mentioned that the current fiscal stimulus isn’t enough to tackle the economic slowdown. They’re cautiously optimistic about Chinese stocks but are ready to buy more if things improve.
Meanwhile, domestic demand is dropping, and there are worries about deflation. Consumer prices barely budged in 2024, rising just 0.5%, the slowest increase in a decade.
Beijing’s mayor, Yin Yong, pointed out that consumer spending is weak, foreign investment is down, and some industries are feeling the heat. The city is aiming for 2% inflation in 2025 and wants to boost tech development.
While the big economic goals won’t be revealed until March, officials have hinted at more fiscal support and plans to issue ultra-long bonds to encourage spending.
Experts believe the announced stimulus will take time to show real effects. The commercial property market is still under pressure, with rents for high-end offices in Beijing dropping significantly.
New shopping centers opened in 2024 with lower occupancy rates than usual, but they’ve seen improvement within a year. It’s a mixed bag for the retail scene.
Unlike the U.S. during the pandemic, China hasn’t handed out cash to consumers. Instead, they announced a trade-in subsidy program worth 150 billion yuan for home appliances and upgrades.
They’ve already issued 81 billion yuan for this year’s trade-in program, which covers more products, including electric cars and smartphones. The goal is to encourage recycling and boost sales.
However, it’s uncertain if this program alone can revive consumer demand. Analysts predict the sales boost might fade later this year, especially with sluggish new home sales.
Real estate used to be a major part of China’s economy, but the crackdown on developers’ debt has caused issues. The government is trying to stabilize the sector after a high-level meeting in September.
They’re looking to finish construction on many sold apartments that are still unbuilt. But experts say the real estate market hasn’t hit rock bottom yet.
Sales of new homes in major cities have surged recently, but there’s still a lot of inventory in smaller cities, meaning prices could drop further.
Geopolitical tensions with the U.S. are adding to China’s economic woes. The government is prioritizing domestic players in key sectors, which is affecting European businesses operating in China.
Officials are focusing on boosting consumption this year, hoping to see more details after the March meeting. They’re optimistic about the impact of trade-in subsidies on spending.
