Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Toward China's Soft Economic Rebound

Economics / China Economy Jan 19, 2024 - 05:33 AM GMT

By: Dan_Steinbock

Economics Last year, international observers charged China for global inflation, deflation and economic collapse. In reality, Chinese economy is inching toward a soft rebound, despite the dire global landscape.
As global business and political leaders swarmed to Davos for the World Economic Forum, Chinese Premier Li Qiang took the podium. Chinese economy has rebounded and moved upward, Li noted, and was estimated to have grown around 5.2% in 2023. That’s slightly better than the official target of around 5%.
No matter how the world’s situation changes, Li added. China will adhere to its fundamental national policy of opening up, and its door will only get wider and wider.” he said.


Brighter macroeconomic outlook       
Chinese economy is heading toward a soft rebound. In the 4th quarter of 2023, GDP growth amounted to 5.2%. Moreover, retail sales grew by 7.4% in December from a year ago. Chinese consumers are gradually returning to the marketplace, but they remain cost-conscious. However, the impending China’s New Year is likely to generate “9 billion passenger trips”; which will accelerate growth in retail, tourism and transportation sectors.
In fact, there is significant pent-up demand in China, stacked in the above-trend deposits. The trick is to unleash that consumption power, and the first condition is a promising job market outlook. According to China’s National Bureau of Statistics, the unemployment rate in cities in December was 5.1%.
Even more interesting is the figure for youth unemployment. Last summer, the unemployment rate for young people aged 16 to 24 soared to record 21.3%. Now, that figure is at 14.9%. That’s about where it was back in January 2022; closer to the past norm.
Furthermore, industrial activities are picking up, with industrial production rising by 6.8% in December from a year earlier, thus beating forecasts. And the same goes for fixed asset investment, which increased by 3% in 2023, slightly above the predicted increase.
Importantly, there is also broad expectation for targeted fiscal support. And in light of the elevated real interest rates, space remains for rate cuts. When will they come? The 10-year real yield of China has risen to 2.89% relative to 1.69% of the US, where policy rates remain high, due to perceived inflation concerns. As the Fed is likely to enter the rate cut cycle later in 2024, China’s cuts will ensue.
Hence, too, President Xi Jinping’s stress of sustained efforts in building China’s "financial power,” aiming at a safe, efficient and internationally competitive financial system.

Steadying property sector                  
As premier Li noted at Davos, China has now some 400 million people in the middle-income group, and that number is expected to double to 800 million in the next decade. By contrast, in the past four decades, middle-class real income has largely stagnated in the United States while Europe is following in the footprints.
In the next decade, urbanization in China will create huge demand in sectors such as housing, education, medical and elderly care, as Li noted Davos. There are still nearly 300 million rural Chinese who will eventually migrate to cities. That translates to great secular potential for investments in upgrading urban transportation and telecoms infrastructure – and a substantial opportunity to domestic and international financial institutions.
After several years of deleveraging in the ailing property sector, Chinese economy seems to have consolidated a soft landing which bodes well for a soft rebound in 2024.
The full recovery of the property market will take its time. The tier-one high-income megacities are usually able to borrow more to support local development, while low-income cities are constrained from aggressive public finance.
As S&P Global Ratings reports, Chinese property sector, though evolving, seems to have steadied and balanced.

Shifting growth model   
At the same time, China’s growth model has gradually shifted from investment and exports toward consumption and innovation. A massive process that took a century or so in the West, but just few decades in China.
In two to three decades, China has moved from catch-up imitation to cutting-edge innovation. In the mid-2000s, steel production growth still peaked at 30%; but today it is decelerating into negative. Meanwhile, China's booming electric vehicle (EV) sales increased by 82% in 2022, accounting for nearly 60% of global EV purchases. This greatly surpasses that of the U.S., and other large-economy early adopters of EVs.
Accordingly, economic reforms are likely to shift away from supply-side reforms to demand-side reforms.
To accelerate this transition, policymakers are likely to focus increasingly on the constraints of human capital rather than infrastructure, which worked in the past. And these changes require parallel reforms and support particularly in property, education and healthcare sectors.

Downside risks in the global horizon           
Nonetheless, risks remain in 2024 on unfinished homes, local government debts and geopolitical risks. The first two could now be regarded as soft risks; but the third one is a black swan; highly consequential, yet unpredictable.
Perhaps that’s why just a month ago, Gita Gopinath, the deputy chief of the International Monetary Fund, asked whether the world community is on the brink of Cold War II. “The economic costs of Cold War II could be large,” she warned, rightly. “The world has become much more integrated, and we face an unprecedented breadth of common challenges that a fragmented world cannot tackle.”
Currently, the challenging external headwinds reflect some moderation. But as long as the West’s geopolitical unilateralism and trade protectionism prevail, global recovery will remain constrained by downside risks and the potential for new and ever-more destructive, unwarranted wars.
As China’s massive transition and the West’s secular stagnation suggest, what the world need is peace and economic development – not economic unilateralism and geopolitical friction.

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/  

© 2024 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dan Steinbock Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in