- Economic performance continued to recover, with support from robust industrial production, manufacturing investment and exports.
- Consumption maintained a sluggish recovery, consistent with muted inflation.
- The government has implemented significant measures to support the housing market, property activities are expected to stabilize.
China’s GDP grew 5.2% in 2023, surpassing the government target. Supported by robust industrial production, manufacturing investment and exports, GDP grew 5.3% in Q1 2024, higher than market expectations. However, headwinds such as weak consumer confidence, tightened policy rates by the US Fed, and geopolitical uncertainty will weigh on the Chinese economy in the coming months. We expect China’s GDP to grow at 5.0% in 2024.
China’s domestic consumption has shown signs of recovery, albeit unevenly. Driven by holiday tourism, service consumption continued to surge by 10% in Q1 2024, whereas the growth of consumer goods consumption still trails behind its pre-pandemic level. Weak domestic demand may weigh on enterprises’ profit and business investment.
Stabilizing employment, improving income growth, and restoring consumer confidence are important to the recovery of China’s economy. According to the Government Work Report, China has set a record-high target of creating more than 12 million new urban jobs this year. Additionally, the target for this year’s urban unemployment rate is ‘around 5.5%’.
After a prolonged decline in the property market, the government has released wide-ranging measures to address the slowdown, such as relaxing restrictions on property purchases, cutting mortgage rates and lowering down-payment ratio. The central bank also provides targeted credit support to buy unsold houses from developers to mitigate liquidity pressures. As a result, real estate investment is expected to stabilize this year, reducing its drag onoverall economic growth.
Despite a decline in China’s exports for five consecutive quarters since Q4 2022 due to the slowing global economy, this trend has started to reverse. China’s exports have shown resiliency in Q1 2024, mainly driven by the rebound of global manufacturing. Trade relations with advanced economies have shown significant improvements in Q1 2024, while commerce with emerging markets have seen fast growth, bolstered by enhanced regional collaborations. Meanwhile, China’s export sector is evolving with a shift towards high-end manufacturing. Integrated circuit, shipbuilding, and new energy vehicles have emerged as pivotal drivers for China’s export.
China is expected to maintain an accommodative policy stance to boost growth. Fiscal support will be stepped up and made more effective. Local governments will issue RMB 3.9 trillion in special bonds to supplement government spending, an increase of RMB 100 billion from last year. In addition, RMB 1 trillion in extra-long term special treasury bonds will be earmarked for major national strategies in key areas.
On the monetary side, China will continue to adopt supportive policies, particularly in targeted areas. This includes expanding liquidity and using special relending facilities to increase financial support for SMEs, green investment, technology, and elderly care. With global financial conditions easing, cuts in the reserve requirement ratio and policy rates are also anticipated.
Explore the national economic outlook for a selection of countries in Asia
Contact us
Connect with us
- Find office locations kpmg.findOfficeLocations
- kpmg.emailUs
- Social media @ KPMG kpmg.socialMedia