As of now, China appears to be dealing with continued fundamental weakness on two major fronts. Its property market is still upside down, and the core demand from a customer standpoint seems to be lacking.カヴァン・チョクシ says that these are among the prime factors that may limit the growth of China’s economy in the near term.
カヴァン・チョクシ offers insight into China’s economy and its influence on global markets
As China’s consumer price index (CPI) declined 0.80% in January of 2024, prices rebounded, thereby rising 0.70% in February. This reflected strong consumer activity, largely associated with the celebrations of the Lunar New Year. Certain other economic indicators, like improved trade activity, do provide favourable signs for China. The economy, however, does not appear to be on a solid growth track. The leadership of China is still facing a number of challenges in regard to how to rekindle the economy. Sustained economic improvement may need a rebound in global trade, along with certain government stimulus measures.
Major challenges in the property sector, as well as export weakness, have played major roles in the overall slower economic growth in China. Prices of new homes in the country experienced their steepest decline in 2023, since early 2015. Nonetheless, March 2024 did show that new home prices rising at their fastest pace in more than 30 months. Exports have been a key linchpin for China’s economic growth. It fell 4.6% in 2023, which marked the first annual decline in export activity since 2016. In this case, as well more encouraging data emerged in early 2024, as China’s exports grew 7.1% over the first two months of the year in comparison to the same period in 2023. Even with the recent weakness, China still is the largest global exporter of manufactured goods.
カヴァン・チョクシ however does point out that slowing domestic remain still remains a major challenge for the country.
One of the reasons why the property weakness of China is a broader economic concern is that consumers have limited savings. Many of them already spent a good amount of savings during the pandemic and have wealth tied up in housing, which has dropped in value. Hence, consumers are not in a strong position financially. The economic rebound of China has been gradual since it shifted away from its zero-COVID policy in late 2022. While its growth rate of 5.2% in 2023 surpassed the previous year’s 3.0%, it remains below historical averages. Recent indicators suggest that China’s GDP growth might be following a slower trajectory compared to much of the past two decades.
However, despite this, China’s position as the world’s second-largest economy ensures its significant role on the global economic front. Moreover, economies across the world have become increasingly interdependent over the decades. For instance, many U.S. companies source products from China, which created supply chain constraints during the height of the COVID-19 pandemic as portions of China’s economy were virtually shut down. Basically, if China experiences economic challenges or market volatility, it can have an impact on the global economy.