Passengers walk along the platform after getting off a train at Chongqing North Railway Station during the first day of the 2025 Spring Festival travel peak on January 14, 2025.
Cheng Shen | Getty Images News | Getty Images
BEIJING – While promised government support has yet to materialize, China's economy has yet to see the turnaround investors have been waiting for.
While policymakers have, since late September, cut interest rates and announced broad stimulus plans, details of the anticipated fiscal support are unlikely to come until the annual parliamentary meeting in March. Official GDP figures for 2024 are scheduled for release on Friday.
“China’s fiscal stimulus is not yet sufficient to address pressures on economic growth… We are cautious in the long term given the structural challenges China faces,” BlackRock Investment Institute said in a weekly report on Tuesday. The company, which has a slight overweight in Chinese stocks, indicated that it is prepared to buy more if conditions change.
Increasingly pressing matters now are falling domestic demand and fears about deflation. Consumer prices barely rose in 2024, rising just 0.5% after excluding volatile food and energy prices. This is the slowest rise in at least 10 years, according to records available in the Wind Information Database.
“Consumer spending remains weak, foreign investment is declining, and some industries are facing pressure on growth,” Beijing Mayor Yin Yong said on Tuesday in an official annual report.
The capital targets consumer price inflation at 2% by 2025, and also aims to promote technology development. While nationwide economic targets will not be announced until March, top economic and financial officials have told reporters in the past two weeks that fiscal support is underway, and that the issuance of long-term bonds to stimulate consumption will exceed last year's.
China's announced stimulus will take effect this year, but it will likely take some time to see a significant impact, Mi Yang, head of research for northern China at real estate consultancy JLL, told reporters in Beijing last week.
He pointed out that the pressures on the commercial real estate market will continue this year, and prices may accelerate their decline before recovering.
Rents for high-end office space in Beijing, called Grade A, fell 16% in 2024 and are expected to fall about 15% this year, with some rents approaching 2008 or 2009 levels, according to JLL.
JLL said new malls in Beijing opened in 2024 with average occupancy rates of 72% – previously such malls would not open if the rate was below 75% or much closer to 100%. But within a year, new malls had seen occupancy rates of up to 90%, the consulting firm said.
Home appliances
Unlike the United States During the COVID-19 pandemic, China did not provide cash to consumers. instead of, In late July, Chinese authorities announced 150 billion yuan (US$20.46 billion) in long-term bonds to support trade. And another 150 billion yuan for equipment upgrades.
China has already released 81 billion yuan for the trade program this year, officials said this month. It covers more home appliances, electric cars and up to 15% discount on smartphones priced at 6,000 yuan or less.
Consumers who buy premium phones tend to upgrade and recycle their devices more frequently than buyers at the lower end of the market, Rex Chen, chief financial officer of ATRenew, which operates premium phones, said, suggesting the government may want to encourage a new group to shortchange their devices. Their upgrade cycle. Shops for processing smartphones and other used goods.
Chen told CNBC on Monday that he expects the trade support program to boost recycling transaction volumes for eligible products on the platform by at least 10 percentage points, up from 25% growth in 2024. He also expects the government to implement similar trade. -In politics for the next few years.
However, it is unclear whether the trade program alone can lead to a sustainable recovery in consumer demand.
Nomura Bank's chief China economist Ting Lu said in a report on Tuesday that he expects the sales boost to fade by the second half of this year, and that tepid new home sales will limit demand for home appliances.
Real estate
Real estate and related sectors such as construction previously accounted for more than a quarter of China's economy. When the central authorities I started to fall apart On the high debt levels of developers in 2020, which, coupled with the Covid-19 pandemic, had ripple effects on the economy.
China changed its position on real estate in September after a high-level meeting led by President Xi Jinping called for it Stop the deterioration of the sector.
Measures to support the sector include the use of a Whitelisting process The construction of many apartments that have been sold but not yet built due to financial constraints of developers has been completed. New apartments in China are usually sold before completion.
Jeremy Zook, senior China analyst at Fitch Ratings, said the real estate market had not yet reached bottom, and authorities may provide more direct support. He noted that it was difficult for the economy to shift away from real estate, despite China's desire to reduce its dependence on the sector for growth.
The government's recent measures helped the broader stock market rise and lifted sentiment a bit.
New home sales in China's largest cities over the past 30 days rose nearly 40% compared to last year, Goldman Sachs analysts said in a report released on January 5.
But they warned that higher levels of inventory in small towns indicate that property prices “have more room to decline” and that homebuilding “is likely to remain low for years to come.”
In the relatively affluent city of Foshan — near the southern Chinese city of Guangzhou — housing stock may take 20 months to clear in one area, and seven months in another, according to a 2024 report from the Beike Research Institute, a subsidiary of the major conglomerate. Home sales platform in China.
Overall, the city saw floor space sold last year fall by 16% to its lowest level in 10 years, the report said.
Geopolitical concerns
Adding to China's economic challenges are tensions with the United States. Similar to Washington's export controls, Beijing has also made efforts to ensure national security by prioritizing domestic players in strategic sectors such as technology.
This situation has put pressure on a growing number of European companies in China to localize – despite additional costs and lower productivity – if they want to retain customers in the country, the European Union Chamber of Commerce in China said in a report last week.
Chinese official statements also emphasized the link between security and development.
Part of Beijing's efforts to support growth is the “construction effort” slogan.Security capabilities in key areasYang Ping, director of the Investment Research Institute of the National Development and Reform Commission, noted while speaking at a press conference on Wednesday.
This year, “priority has been given to boosting consumption before improving investment efficiency,” Yang said in Chinese, translated by CNBC. “Expanding and enhancing consumption are the main focus of the policy adjustment this year.”
She dismissed concerns that the impact of trade support on consumption would fade after the initial rise, and indicated that more details would emerge after the parliamentary meeting in March.
