On January 14, 2025, the first day of Spring Festival travel in 2025, passengers walked along the platform after getting off the train at Chongqing North Railway Station.
Cheng Xin | Getty Images News | Getty Images
BEIJING – China’s economy has yet to see the improvement investors have been waiting for, as promised government support has yet to take effect.
Although policymakers have cut interest rates and announced a broad stimulus package since late September, details of the much-anticipated fiscal support are unlikely to be released before the annual parliamentary meeting in March. Official GDP data for 2024 will be released on Friday.
BlackRock Investment Institute said in a weekly report on Tuesday that “China’s fiscal stimulus measures have not been sufficient to address the drag on economic growth… We are cautious on the long term given the structural challenges facing China.” The company added modestly It holds a position in Chinese stocks and says it is prepared to buy more shares if conditions change.
Meanwhile, increasingly pressing issues are falling domestic demand and deflationary concerns. Consumer prices barely rose in 2024, rising just 0.5% after excluding volatile food and energy prices. This is the slowest growth rate in at least 10 years, according to Wind information database records.
“Consumer spending remains weak, foreign investment is declining and some industries are facing growth pressure,” Beijing Mayor Yin Yong said in an official annual report on Tuesday.
The capital targets consumer price inflation of 2% by 2025 and aims to promote technological development. Although national economic targets won’t be released until March, senior economic and financial officials have told reporters in the past two weeks that fiscal support is on the way, with more ultra-long-term bond issuance to stimulate consumption than last year.
Mi Yang, head of research for North China at real estate consultancy JLL, told reporters in Beijing last week that the stimulus measures announced by China will take effect this year, but it may take some time to see a significant impact.
He said pressure in the commercial real estate market will continue this year, with prices likely to accelerate and then recover.
According to Jones Lang LaSalle, rents for high-end Grade A offices in Beijing will fall by 16% by 2024 and are expected to fall by nearly 15% this year, with some rents even approaching the levels of 2008 or 2009.
Jones Lang LaSalle said new shopping malls in Beijing will open in 2024 with an average occupancy rate of 72%. Previously, such shopping malls would not open if the occupancy rate was less than 75% or close to 100%. However, within a year, the new shopping center achieved 90% occupancy, the consultancy said.
Home appliances
different from the united states China is not handing out cash to consumers during the Covid-19 pandemic. instead, Chinese authorities announced at the end of July that 150 billion yuan ($20.46 billion) of ultra-long-term bonds would be used for trade-in subsidies and another 150 billion yuan for equipment upgrades.
Officials said this month that China has released 81 billion yuan for this year’s trade-in program. It covers more home appliances, electric vehicles and smartphones priced at 6,000 yuan and below with discounts of up to 15%.
ATRenew Chief Financial Officer Rex Chen said consumers who buy high-end phones tend to upgrade and recycle their devices more frequently than buyers in the lower end of the market, suggesting the government may want to encourage new groups to shorten upgrade cycles. shop.
Chen told CNBC on Monday that he expects the trade-in subsidy program to increase recycling transactions for eligible products on the platform by at least 10 percentage points, up from a 25% increase in 2024. policy for several years.
However, it is unclear whether trade-in programs alone will lead to a sustained recovery in consumer demand.
Lu Ting, chief China economist at Nomura Securities, said in a note on Tuesday that he expects sales growth to fade in the second half of this year, while tepid new home sales will limit demand for home appliances.
real estate
Related industries such as real estate and construction once accounted for more than a quarter of China’s economy. When the central authority High debt levels hit developers at the start of 2020, which along with the Covid-19 pandemic had a knock-on effect on the economy.
China changed its stance on real estate in September after a high-level meeting chaired by President Xi Jinping called for curbing the sector’s decline.
Measures to support the sector include using a whitelisting process to complete the construction of many apartments that have been sold but have not yet been built due to developers’ financial constraints. New apartments in China are often sold before they are completed.
Jeremy Zucker, chief China analyst at Fitch Ratings, said the real estate market has not yet hit bottom and the authorities may provide more direct support. He pointed out that although China hopes to reduce its growth dependence on the real estate industry, it will be difficult for the economy to escape the transformation of the real estate industry.
The government’s latest measures helped stocks rise overall and gave a slight boost to sentiment.
Goldman Sachs analysts said in a January 5 report that new home sales in China’s largest cities increased nearly 40% annually over the past 30 days.
But they warned that high inventory levels in smaller cities suggested “there is room for further declines” in house prices and that home construction “is likely to remain sluggish for years to come.”
In Foshan, a relatively wealthy city near Guangzhou in southern China, it could take 20 months to clear housing inventory in one area and seven months in another, according to a 2024 report by Beike Research Institute. China’s home sales platform.
The city’s overall sales volume fell 16% last year to its lowest level in 10 years, the report said.
geopolitical concerns
Tensions with the United States complicate China’s economic challenges.
The European Chamber of Commerce in China said in a report last week that this stance has forced more and more European companies in China to localize, despite increased costs and reduced productivity, if they want to retain Chinese customers. .
Chinese official statements also emphasize the integration of security and development.
The slogan for part of Beijing’s pro-growth efforts is to strive to build “Security capabilities in key areasYang Ping, director of the Investment Research Institute of the National Development and Reform Commission, said at a press conference on Wednesday.
This year, “promoting consumption takes priority over improving investment efficiency,” Yang said in Mandarin (CNBC translation). “Expanding consumption and boosting consumption are the main focus of policy adjustments this year.”
She dismissed concerns that the impact of trade-in subsidies on consumption would subside after an initial surge and said more details would be released after the March parliamentary meeting.
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