Howard Marks, Co-Chairman of Oaktree Capital.
Courtesy of David A. Grogan | CNBC
Veteran investor Howard Marks said he was hopeful about China’s economy but warned that China’s growth goals were a huge challenge.
“I remain optimistic about China’s long-term possibilities as long as they execute well and remain constructive to the rest of the world,” said the co-chairman of Oaktree Capital Management.
“Although their (China’s) target growth rate doesn’t sound big compared to history,” Marks told CNBC’s Emily Chan on the sidelines of the third Global Financial Leaders Investment Summit hosted by the Hong Kong Monetary Authority. Still well above average.
China has set a growth target of “around 5%” in 2024, although institutions such as Bank of America and Citigroup expect growth in the world’s second-largest economy to be below 5%.
The World Bank predicts China’s economic growth will be 4.8% in 2024, and expects it to decline further to 4.3% next year, despite a series of recent measures to boost the economy. Chinese authorities have stepped up stimulus since late September.
The World Bank pointed out that China’s sluggish consumer spending, troubled real estate market and aging population are major problems facing the world’s second-largest economy.
“You can’t grow through stimulus forever,” Marks said. “So their growth rate is going down, their use of stimulus is going down, and they’re trying to design the right mix.” He added that he hopes China Able to meet challenges.
Earlier this month, China unveiled a five-year plan worth 10 trillion yuan ($1.4 trillion) to address local government debt and said it would provide additional economic support next year. Donald Trump’s victory in the 2024 presidential election has raised concerns about increased tariffs on Chinese exports.
The People’s Bank of China cut the deposit reserve ratio (RRR) by 50 basis points in September to inject more liquidity into the Chinese economy while requiring banks to hold less cash. In the same month, President Xi Jinping presided over a meeting and emphasized the need to strengthen fiscal and monetary support and strive to curb the decline of the real estate market.
“But when there’s too much stimulus in areas like real estate and too many buildings are built, you have to go through a period of adjustment,” Marks said.
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