China Economic Outlook. March 2024

Summary

We summarized the recent Chinese economic development as well as policy outlook in 2024. We also highlight the March 2024 "Two sessions".

Key points

• Key points:
• China’s 2023 GDP reached 5.2%, in line with our forecast and consensus, much higher than 3% in 2022 when the country was grappling with the pandemic. But considering base effect, 2022-23 two-year average GDP dipped to 4.1%, off the pre-pandemic track of “higher-than-6%”.
• The recent economic bottoms-out are supported by (i) consumption (service sector recovery), (ii) industrial production (policy priority of high-end manufacturing and green transformation), (iii) infrastructure investment backed by the extra RMB 1 trillion government bond issuance and (iv) the exports resilience.
• Risks in 2024 focus on real estate market, local government debt, deflation, dropping FDI/portfolio inflows and geopolitics, but we think the systemic financial risks do not exist at the current stage, given the prudent monetary policy and a series of precautionary financial regulation measures.
• China-US confrontations have achieved some marginal improvement recently amid the high-level China-US communications, chief among them is Xi-Biden talk in the APAC meeting, etc., but the newly elected Taiwan’s president and this year’s US president election provides uncertainties for China-US relations.
• Monetary and fiscal policy remains expansionary in 2024 to support recovery. We anticipate the government will announce the 2024 GDP growth target to “around 5%”. In addition, it will also promulgate China’s 2024 inflation target, monetary target, emission target as well as a series of monetary and fiscal stimulus in 2024.

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