Kavan Choksi Wealth Advisor Talks About Expected Trends for China’s Economy in 2024

2024 can be a year of stabilization and consolidation for China. However, there is still a downward force as the country is still experiencing a considerable real estate market downturn. As Kavan Choksi Wealth Advisor mentions, gross domestic product (GDP) growth will level off at a rate of roughly 4.4 to 4.5% in the year. China’s economy is likely to grow by 4.4% in 2024, as the base effect of post Covid-19 recovery fades. The infrastructure investment in the country is likely to slow a bit even with more explicit fiscal support.

Kavan Choksi Wealth Advisor sheds light on a few themes and trends to watch in China in 2024

In 2024, the real estate market may stabilize at low levels with further policy support.  Many policies have been introduced to stabilize the real estate market, including financing for social housing and so-called urban village renovations. In order to increase demand, the required down payment and mortgage interest rates have also been lowered. However, the government is also cautious about enabling significant real estate price drops to avoid large-scale asset impairments on bank balance sheets.

Despite of being really weak, the property market has not quite reached its lowest point over the past few months. Hence, there is still hope that they will stabilize and start to recover at some point in the first half of 2024. Moreover, assuming that the property market does stabilize, household income and labour market normalization are also likely to persist in 2024, driven by a continued recovery in the services sector, with real household income expanding by around 5%. Even though household confidence may remain weak, it is unlikely to worsen further to a major extent. As a result, some excess savings will be released to help boost consumption. However, as base effects fade off, services consumption growth is predicted to slow in 2024 and total real consumption to grow by 5.5%.

The retreat of foreign financial investment in China has been extremely notable. A number of foreign companies are concerned about a weakening investment environment, particularly with the US Federal Reserve interest rate outperforming returns in Chinese financial markets. This shift additionally represents a technical adjustment for higher returns instead of just an indication of poor economic performance in China. However, it is also not fair to look at China as one single business market or generalize across industries. After all, many industries do show high growth potential in China and are open to foreign investors. These industries include healthcare, renewable energy, aviation, and high-end manufacturing.

Kavan Choksi Wealth Advisor mentions how the term “China’s new normal” was introduced by President Xi Jinping to describe China’s shift towards a slower rate of GDP growth and a maturing economy. This new normal tends to be marked by four important characteristics, which include high risks, mid-to-high rate growth, an upgraded economic structure, as well as a shift from a production investment-driven model to an innovation-driven one. Even with the challenges arising from stagnant demand and excess supply, a cautious recovery is expected in China, with the growth rate to stabilize at around 4-4.4%.