Passengers walk along the platform after getting off the train at Chongqing North Railway Station on the first day of the 2025 Chinese New Year travel rush, January 14, 2025.
Chen Xin | Getty Images News | Getty Images
BEIJING — China’s economy has yet to show the turnaround investors were hoping for, although promised government aid is still set to be meaningfully mobilized.
Policymakers have announced interest rate cuts and broader stimulus measures since late September, but details of the expected fiscal support will not be revealed until the annual Congress in March. Official GDP statistics for 2024 are expected to be released on Friday.
“China’s fiscal stimulus is still not enough to address the drag on economic growth…Given China’s structural challenges, we remain cautious in the long term,” BlackRock Investment Institute said in its weekly report on Tuesday. There is,” he said. The firm, which is slightly overweight in Chinese stocks, indicated it was prepared to buy more if conditions changed.
On the other hand, concerns about a decline in domestic demand and deflation are becoming more urgent. Consumer prices rose little in 2024, rising just 0.5% excluding volatile food and energy prices. This is the slowest rise in at least a decade, according to records available in the Wind Information database.
Beijing Mayor Yin Yong said in his official annual report on Tuesday that “consumption spending remains weak, foreign investment is declining, and some industries are facing growth pressure.” said.
The capital is targeting a consumer price increase rate of 2% in 2025 and is aiming to strengthen technological development. National economic targets will not be announced until March, but senior economic and fiscal officials have told reporters in the past two weeks that fiscal support measures are under consideration, and that the amount of super-long-term bonds to stimulate consumption has increased from last year. He said it would exceed.
Mi Yan, head of northern China research at real estate consultancy JLL, told reporters in Beijing last week that the economic stimulus measures announced by China will start to take effect this year, but it will take time to see any major effects. He said it would take a while.
He said pressure on the commercial real estate market will continue this year and prices may fall faster before recovering.
According to JLL, Beijing’s premium office rents, known as Grade A, are expected to fall by 16% in 2024 and by nearly 15% this year, with some rents approaching 2008 and 2009 levels. It is said that there is.
According to JLL, new shopping centers in Beijing opened in 2024 with an average occupancy rate of 72%, whereas previously such malls were forced to open when occupancy was below 75% or much closer to 100%. It is said that there was not. But within a year, the new mall reached 90% occupancy, according to the consultancy.
home appliances
Unlike the United States during the coronavirus pandemic, China is not handing out cash to consumers. Instead, Chinese authorities announced in late July that they would issue 150 billion yuan ($20.46 billion) in super-long-term bonds as trade-in subsidies and another 150 billion yuan for equipment upgrades.
Officials announced this month that China has already issued 81 billion yuan for this year’s trade-in program. More home appliances and electric vehicles will be eligible, and smartphones priced under 6,000 yuan will also be discounted by up to 15%.
Consumers who buy premium mobile phones tend to upgrade and recycle their devices more frequently than buyers in lower-end markets, indicating that governments may want to encourage new groups to shorten their upgrade cycles. said Rex Chen, chief financial officer (CFO) of ATRenew, which operates ATRenew. A shop that processes smartphones and other second-hand goods.
Chen told CNBC on Monday that he expects the trade-in subsidy program to increase the volume of recycled transactions for eligible products on the platform by at least 10 percentage points, up from 25% growth in 2024. He also expects the government to make similar deals. -Policy for the next few years.
However, it is unclear whether trade-in programs alone will lead to a sustained recovery in consumer demand.
Ting Lu, Nomura’s chief China economist, said in a note on Tuesday that he expects the promotional effect to wane by the second half of this year, with weak new home sales limiting demand for home appliances.
real estate
Real estate and related sectors such as construction once accounted for more than a quarter of China’s economy. When central authorities began cracking down on developers’ high debt levels in 2020, it had a knock-on effect on the economy, along with the coronavirus pandemic.
In September, China changed its stance on real estate after a high-level meeting led by President Xi Jinping called for halting the decline of the real estate sector.
Measures to support the sector include using a whitelisting process to complete the construction of many apartments that have been sold but not yet built due to developers’ financial constraints. Newly built apartments in China are usually sold before they are completed.
Jeremy Zook, lead China analyst at Fitch Ratings, said the real estate market had not bottomed out yet and that authorities could provide more direct support. He pointed out that despite China’s intention to reduce dependence on the real estate sector for growth, it will be difficult for the economy to move away from real estate.
The government’s latest measures helped the overall stock market rally and slightly improved sentiment.
Goldman Sachs analysts said in a Jan. 5 report that new home sales in China’s largest city rose nearly 40% year-on-year in the past 30 days.
But they warned that high inventory levels in small cities meant property prices had “room for further declines” and that home construction was “likely to remain depressed for years to come.”
In the relatively affluent city of Foshan, near Guangzhou in southern China, it could take 20 months in some areas and seven months in others to clear out the housing inventory, according to research from North America, a major company. According to the 2024 report released by China’s home sales platform.
Citywide, floor space sold last year fell by 16%, the lowest in a decade, according to the report.
geopolitical concerns
Complicating China’s economic challenges are tensions with the United States. Similar to Washington’s export controls, Beijing is also seeking to ensure national security by prioritizing domestic players in strategic areas such as technology. It’s here.
China’s European Union Chamber of Commerce and Industry said in a report last week that this attitude has led many European companies expanding into China to remain local, despite added costs and reduced productivity, in order to retain customers in China. He said he was under pressure to change his mind.
China’s official statements also emphasize the link between security and development.
As part of the Chinese government’s efforts to support growth, the slogan is an effort to build “security capabilities in key areas”, noted Yang Ping, director of the National Development and Reform Commission’s Investment Research Institute. She spoke at a press event Wednesday.
This year, “expanding consumption is prioritized over improving investment efficiency,” Yang said in Mandarin, as translated by CNBC. “Expanding and promoting consumption is the main focus of policy adjustments this year.”
He dismissed concerns that the trade-in subsidy’s impact on consumption would fade after the initial surge, suggesting more details would emerge after Congress in March.
