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Mainland China: Modest Growth Adjustment Amid Mixed Signals from Stimulus Efforts
GDP growth edged down to 4.6% in Q3 2024, but the forecast for 2024 is slightly revised up to 4.8%. Monetary easing continues, with mixed prospects for fiscal stimulus.
GDP growth edged down to 4.6% in Q3 2024, but the forecast for 2024 is slightly revised up to 4.8%. Monetary easing continues, with mixed prospects for fiscal stimulus.
Key View
- GDP growth slowed to 4.6% y-o-y in Q3 2024 from 4.7% in Q2 as the manufacturing sector struggled.
- We have revised our 2024 forecast upward slightly to 4.8% from 4.7% to account for the slightly stronger data so far, as well as what we think will be a largely steady economy in Q4.
- While Beijing has clearly ramped up monetary easing, the jury is still out on fiscal stimulus. As such, we have also tweaked our 2025 growth forecast slightly upward to 4.5% from 4.4%.
Real GDP expanded by 4.6% y-o-y in Q3 2024, slightly outperforming most economists’ estimates (BMI: 4.5%, Bloomberg Consensus: 4.5%). As a result, output for the first three quarters of the year came in at 4.8%, and just above our long-held 4.7% growth forecast. While the recent monetary and fiscal stimulus announcements are probably too late to make a big difference in Q4 2024, we do not think the economy will slow much further through year-end (see chart below).
Mainland China has recently experienced a slight upward revision in its economic growth forecasts, signifying a cautious optimism among analysts and policymakers. This shift comes amidst a backdrop of mixed stimulus measures aimed at revitalizing the economy, which has faced numerous challenges in recent years, including the impact of the COVID-19 pandemic and ongoing global economic uncertainties. The government’s efforts to balance growth with financial stability are evident as they implement targeted strategies to boost domestic consumption and investment.
Notably, the recent revisions reflect an intricate interplay between fiscal policies and monetary measures. While some areas of the economy show signs of recovery, others remain sluggish, highlighting the uneven nature of the rebound. The central government has emphasized infrastructure projects and support for small and medium-sized enterprises, hoping these initiatives will stimulate broader economic activity and consumer confidence.
Despite the positive revisions, caution prevails among economists who emphasize the need for sustained reforms. Investors remain wary, watching for potential risks, including property market vulnerabilities and external trade tensions. The mixed signals underscore the delicate balancing act China faces in fostering growth while navigating both domestic challenges and the global economic landscape.
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