China Economic Outlook. October 2024

Summary

The Chinese economy is experiencing structural rebalancing amid deep real estate adjustment. Due to the large-scale stimulus package, we believe the economy will bottom out in the near future.

Key points

• Key points:
• 2024 Q2 GDP decelerated to 4.7% from 5.3% in Q1, with unbalanced economic structure that supply side is stronger than the demand side persisting.
• However, since September 24, the authorities have promulgated a series of jumbo size stimulus package to support growth. The market views it as "China's Draghi moment" or "Chinese style QE".
• Look ahead, the US and Europe’s rate cut cycle provides policy room for China’s easing measures. As the historically large China-US rate reversion gradually normalizes, there will be more capital inflows and stronger RMB.
• Although the Chinese stock market has rallied significantly reflecting the stimulus package, the recovery has not got a solid foundation as the deep adjustment of real estate and unbalanced economic structure remain. Deflationary environment and geopolitics risks also persist with weak market sentiments of households and enterprises not reversed.
• The 3nd Plenary Session of the 20th Central Committee of CCP in July outlined the long-term blueprint of “Chinese-style modernization” with “new quality productivity” in 2020-2035.

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