MW China's economy still hasn't fully emerged from the pandemic as a new year dawns
Tanner Brown
Weak consumer demand is just one of a range of factors plaguing the economy as the calendar turns from 2024 to 2025, even after policy makers meted out stimulus measures throughout the past year
This month offers a particularly reflective time in China, for consumers, families, small-business people and investors alike. The globally celebrated New Year's holiday and the Chinese Lunar New Year have both happened to fall in January.
The pervasiveness of change in the atmosphere has sent some citizens into an intense spell of contemplation - this after China's economy repeatedly failed to meet expectations on nearly every major growth metric in 2024.
In MarketWatch's conversations with a dozen Chinese workers, students and retirees, one thing became clear: They are glad last year is behind them. For most, it was yet another year after the coronavirus pandemic filled with stagnant wages or job losses, declines in the value of their homes, and tightening of pocketbooks for nonessential items that just a few years ago would have seemed handily within reach.
Ruminations on the year ahead were mixed. Many expressed hope that policy makers will unleash potent stimulus packages or that the country's new normal of slower growth is just a blip of sluggishness that will be overcome, taking the world's second-largest economy back to its familiar double-digit annual expansion.
"I know my customers, and they are not doing particularly great financially," said 38-year-old Wu Lingling, who sells phone accessories on most of China's myriad e-commerce channels, including the leading trifecta of Alibaba's Taobao; JD.com; and PDD, also know as Pinduoduo.
"But they've told me they are just biding their time until things turn better for the country's fortunes," Wu said by video call from her home in China's eastern Anhui province.
That optimism may represent wishful thinking. President Xi Jinping has promoted Communist Party ideology over economic pragmatism, leading to concern from independent economists and grumbling within party ranks. But even Xi has been forced to publicly acknowledge the country's underperformance.
"The current economic operation is facing some new situations, there are challenges from the uncertainty of the external environment and pressure from the transformation of new and old drivers, but these can be overcome through hard work," he said in a New Year's Eve address broadcast on state TV.
Looking at GDP growth numbers for the first three quarters of 2024, it seems unlikely policy makers will hit their target of "near 5%" expansion for the year.
While the World Bank revised its forecast for 2024 growth to 4.9% from 4.8%, analysts at research firm Rhodium Group wrote this week that expansion has likely been much lower for the year, putting the figure between 2.4% and 2.8%.
Unemployment has failed to ease below the 5% threshold top leadership traditionally considers a ceiling, while youth unemployment has lurched upward to nearly 20% - meaning roughly one in five Chinese people aged 16 to 24 cannot find work.
Beijing-based Lizzie Yan, 22, graduated in June from China's most prestigious college, Peking University, but has been unable to find any work commensurate with her once highly valued credential. "I could get a position at a fast-food restaurant, but I think that would only make my résumé look worse," she told MarketWatch.
By far the biggest drag on the economy is the spiraling property market, where investment plunged by 10.4% in 2024 from the year before through the first 11 months of the year, according to the National Bureau of Statistics. Real estate is the most common form of investment for the Chinese, so the collapse in home prices across the country has drained trillions from households' net worth.
Beijing has scrambled to stem these economic troubles. In September, the authorities rolled out multiple stimulus measures, including support for the property sector and a $1.4 trillion package to assist local governments cope with their long-running debt issues.
But the area that most irks experts and common people alike is the stubborn crisis of consumer confidence and the lack of support from the government for demand-side help.
"The government has been saying for almost a year that it will come to help us who are struggling," said Xu Leiyu, a 42-year-old from the western city of Chengdu who lost her job at a mobile-phone outlet two months ago. "But I have seen zero support."
At a high-level meeting last month, top officials specifically said they would be rolling out help to boost consumption, but no further details were provided, and nothing has been implemented since.
Weak consumption and a lack of inflation across the country have resulted in deflation - hitting a five-month nadir in November - dampening wages and business profits.
"We believe deflation will continue in China, especially based on the previous experience during trade wars," Becky Liu, head of China macro strategy at Standard Chartered Bank, wrote in a recent note.
Tanner Brown covers China for MarketWatch and Barron's.
More Tanner Brown dispatches:
Foreign brands are back in China. But the economy has cooled and domestic competition is dug-in.
U.S. companies reassert their dominance of Fortune Global 500 ranks vs. rival China
China's economy needs more than this stimulus plan to lift it out of the doldrums, experts say
The world's largest pension fund may be running dry
American and European companies lament record difficulty operating in China
Luxury-goods brands fear their golden goose - China - is cooked
Also read:
The good news about Trump's bad economic plans? They might not happen.
China has cost the U.S. millions of jobs. Trump will change that - not necessarily for the better.
U.S. trade deficit is rising again. Can Trump do anything about it?
Biden's gift to Trump: a golden opportunity to supercharge the economy
Treasury Department says Chinese hackers accessed workstations and documents via third-party software
-Tanner Brown
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January 04, 2025 06:25 ET (11:25 GMT)
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