The Chinese economy grew 5.2% year-on-year in 2023, somewhat above Beijing's goal of 5%, according to official statistics data published this Wednesday. Accustomed to strong growth, it is one of the lowest advances in recent decades, although higher than 3% in 2022, when the impact of the covid crisis and restrictions was still looming.
The evolution of activity by sector, the rise in unemployment or the real estate collapse cast doubts and raise the need for more stimuli. In a context of slowdown, the authorities affirm that there is room for maneuver on the fiscal and monetary front if it becomes necessary.
“The Chinese economy can withstand ups and downs in its performance. The general trend of long-term growth will not change,” said Chinese Prime Minister Li Qiang yesterday in Davos, who had advanced the figure. Quarter by quarter, growth has been moderating. At the end of the year, in the fourth quarter, it advanced 1% compared to the previous three months. In the third quarter the figure was 1.5%. "The external environment is increasingly complex, severe and uncertain, and economic growth still faces difficulties and challenges," the statistical office has highlighted.
Putting the magnifying glass on the data shows an uneven recovery, which is worrying in the markets. Along with the GDP, other more negative data for December have been published, with a crisis in the real estate market that is worsening: new home prices fell at the fastest rate since 2015 and sales fell by 8.5%. New works decline by 20%.
Added to this is slowed retail sales growth - 7.4% year-on-year, the lowest since September - and lukewarm investment. While unemployment is growing by one tenth, to 5.1%, the positive note is industrial production, which is advancing at the highest rate since February, 6.8%.
China, in addition, records the second population drop in a row, after the first drop since the sixties last year. The idea of booming consumption by citizens is not assured... In Davos Li Qiang recognized that the country is immersed in a “transition towards slow and ecological growth”, while the middle class is growing. Currently, he noted, there are about 400 million middle-class people in China, a number that “is expected to double to 800 million in the next decade.” “For a wide range of products and services, consumer demand will shift from quantity to quality; “This will generate great drivers of consumption,” he said.
The data suggests that the economy begins the year on an unstable footing, with persistent deflationary pressures. The outlook makes new stimulus policies more necessary, such as a rate cut, or a good international environment, where there is still a struggle to contain inflation and negative surprises arise such as the Red Sea crisis.
The Hang Seng of Hong Kong has fallen by 3.7% and the Shenzen index by 2.2%, which has ended up spreading doubts about the European opening. A Chinese slowdown could curb the Asian giant's demand for goods from the rest of the world.
