Why Economists Are Raising China's Growth Forecasts
It's been really a patchy recovery, right? I talked about those deflationary pressures. Given the consumption seems to be pretty stagnant at the moment, what is the overall picture like for the Chinese economy for 2024? You're absolutely right. Right now, the outlook has improved by a little bit, and that's really buoyed by exports. And this is driven by a global shift in demand from services back to goods as other economies continue to recover. And we've also seen Chinese exports beating expectations in both April and May. And this reflects the growing competitiveness of Chinese exports. But of course, exports is still the area where we see increasing headwinds with all these accusations of overcapacity. And leading to, you know, more and more trade barriers targeted at Chinese companies. But if you look at that growth forecast there, the table in on your screens now, retail sales expected to grow at 4.9%, down from 5.2%. And also economists paring back expectations for consumer price inflation as well as factory gate inflation. This really reflects that pessimism in the economy, consumers still holding back spending as the property crisis continue to deepen, as people continue to be worried about income growth and their job security as well. What can the government realistically do at this point to boost spending investment confidence? Yes, well, look, the forecast now is for a growth of 5% and that's also in line with the government target for the year. And you heard Premier Li Chiang saying yesterday at the World Economic Forum that China is very confident of heat hitting that target. So if everything goes on track, we don't expect the government to really pull out any big guns to over stimulate the economy at this point. When it comes to monetary policy, we've seen the PBOC being being quite reluctant to cut rates so far to protect the UN. Economists still hold expectations that the MLS. And the loan prime rates could be cut in the third quarter. They are pushing back expectations for the reserve requirement ratio cut from the 2nd to the third quarter as we see the PBOC shift its priority to really increase efficiency of funds rather than continue expanding its balance sheet. As for fiscal policy, we want to look out for the July cleanup that could be taking place anytime in the next few weeks. Whether there would be policy reforms, especially to address youth unemployment, because again, youth, some of the biggest spenders in the economy, they're the ones willing to go to the cinemas, to the concerts. And then also whether there would be policy reforms. When it comes to boosting confidence in the private sector.