- China has yet to see an economic rebound back to pre-pandemic, and that will likely remain true in 2024.
- The Conference Board forecasts GDP growth to decelerate to 4.1% in 2024, down from an estimated 5.2% in 2023.
China's economy has yet to fully bounce back from its stringent lockdowns of the pandemic. And according to the Conference Board's China Center for Economics and Business, the growth struggle will continue into 2024.
What looked like a demand-fueled rebound in the first quarter of 2023 later fizzled as indebted real estate giants like Evergrande and Country Garden flailed, aging demographics and soaring youth unemployment weakened the labor market, and the country tipped into deflation.
Softer domestic and external demand for Chinese goods, a deteriorating job market, and an erosion of business profits thanks in part due to low inflation also dragged on second-quarter growth. GDP expansion came in at 0.5% on a quarter-over-quarter basis, down from 2.3%.
Then, in the third quarter, growth offered another head-fake by ticking higher. And although the Confidence Board expects that upward trend to persist through year-end, they say it's unsustainable and likely to give way to a further slowdown in 2024.
The Confidence Board forecasts GDP growth of 4.1% for the full year, down from the 5.2% currently estimated for 2023. Detailed below are four main reasons why they see China facing below-trend growth in 2024 that could extend for years.
1. Pent-up demand will decline
While China saw a sizable uptick in consumption during the third quarter, that was driven by pent-up demand, which the Conference Board expects to recede in the coming months.
"Confidence remains weak, and there are no observable developments at the present time that might see a turnaround in sentiment," the economists wrote in a report shared with Business Insider.
In their view, consumption hasn't yet recovered to a sustainable degree, and Chinese citizens remain concerned about their financial security and the labor market, as well as policy from Beijing that discourages spending and encourages precautionary saving.
2. The real estate slump isn't going away
Major Chinese property developers have defaulted or declared bankruptcy this year, and authorities' attempts to stabilize the real estate sector haven't had any meaningful impact.
"The downturn is structural, and likely to be permanent," the Conference Board said. "Chinese households have lost confidence in property as a channel for wealth accumulation. It is hard to predict when the sector will stabilize; but, when it does, it won't go back to being such a key growth driver as in previous decades."
The property sector, in the economists' view, has yet to bottom out, and Beijing will struggle to revitalize demand.
3. Foreign demand for Chinese products is poised to slow
A global economic slowdown, led by recessions in the US and Europe, presents bad news for China.
Demand for China's manufacturing exports will continue to moderate against a backdrop of a global downturn into the new year, the Conference Board said.
"China will not be able to export a way out of the aggregate demand problem caused by its real estate downturn," the economists noted.
4. Beijing can't implement major stimulus, only incremental measures
Because China's economy faces deep-seated structural issues, any overhaul or enormous stimulus package opens the door to catastrophe, in the Conference Board's view.
There is some room for policy to stimulate credit growth and investments, but the larger the intervention becomes, the higher the odds of triggering more economic inefficiencies and speculative investments.
"So far, the government has refrained from implementing a broad-based stimulus package," the economists said. "Still, over the past months, the government has been stepping up monetary and fiscal measures to stimulate 'targeted' investment, especially in infrastructure for flood recovery and disaster prevention. As a result, while the strong recovery blip seen in 2023 Q3 will dissipate, growth in 2024 is likely to remain stable."