China’s economy grew 5.2% in 2023, confirming the figure leaked earlier by Premier Li Qiang at the World Economic Forum in Davos, and slightly beating Beijing’s official target as the economy grappled with a property sector crisis, falling exports and deflationary pressure.
Source: Trading Economics
The GDP figure exceeded the government’s official target of 5%, and outpaced growth of just 3% in 2022 when the economy was hit by drastic pandemic restrictions.
But the data highlights the challenge for President Xi Jinping to build a stronger economic recovery in 2024. Economists said the figure was probably flattered by as much as 2% by the low base effect from the pandemic in 2022.
The property downturn is well into its third year, exports are weak, wary investors are steering clear of China’s financial markets and policymakers are fighting the country’s longest run of deflationary pressure since the 1997-98 Asian financial crisis.
As with last year, the property sector is the biggest uncertainty facing the economy in 2024. The government has announced multiple initiatives in its attempts at support, but nothing appears to be making a significant difference.
Beyond the property sector, economists argued that a much broader stimulus package coupled with reforms was urgently needed to reflate the economy.
Deflation is tremendously worrisome for a country like China which is accumulating public debt faster than even Japan ever did. During times of deflation, prices and wages fall, but the value of debt does not, raising the burden of repayments.
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