China's economy to grow 5.3% in 2024 but is this enough?

China breathes a sigh of relief after the latest reports found that the country’s economy is set to expand by 5.3 per cent this year. According to the ASEAN+3 Macroeconomic Research Office (AMRO), the economy is expected to see growth as the country’s property sector stabilizes and external demand improves.

The Singapore-based group said in the report that a gradual property sector recovery in China amid ongoing policy support would also boost real estate investment and generate spillovers for the rest of the region, Bloomberg reported.

It is important to note that AMRO’s forecast is roughly in line with China’s official growth target which is about 5 per cent. The number was initially seen as ambitious due to the challenges the Chinese economy was currently facing.

Earlier this year, a Bloomberg survey forecasted that China’s GDP could see a 4.6 per cent expansion this year.

China will continue to remain a powerhouse: AMRO

AMRO’s chief economist Hoe Ee Khor maintained a positive outlook towards the Chinese economy. “China will continue to be a powerhouse in the region and the main driver of growth,” Khor told Bloomberg.

“The real estate sector weakness will take a bit of time to overcome, but it will happen and we expect the drag on growth will bottom out maybe this year,” he added.

What are the key forecasts? 

In the report, AMRO stated that growth across the ASEAN nations plus China, Japan and South Korea will expand by 4.5 per cent this year from 4.3 per cent, recorded last year. The body also maintained that the domestic demand in the region is likely to remain resilient.

It is pertinent to note that China, Japan and South Korea make up about three-quarters of Asia’s contribution to global growth. AMRO stated that while the region’s inflation outlook is muddled, Global commodity prices are set to normalize.

The body maintained that rising geopolitical tensions between the US and China and the specific government actions in light of this have the potential to keep upward pressure on prices.

AMRO gave the example of the Chinese government’s decision to make subsidy cuts in Thailand and Malaysia). “Geoeconomic fragmentation” is increasingly a risk, the body noted as the trade ties between the US and China have slowed amid high tariffs.

The body also mentioned that the semiconductor industry in China is also expected to rebound after a multiyear slump. The demand for the semiconductor chip in China is expected to “briskly” recover in the second half of 2024.

While the report highlighted several positives, it also pointed out that the demographics continue to be an area of concern for Asia.

The authorities noted that people are ageing faster in the Asian region than in many other parts of the world, with its total working-age population projected to shrink in the second half of this decade.

The big picture

The sluggish growth of the economy – if we compare it with past figures, indicates the real problem.

According to Bloomberg, in the year 2004, the Chinese economy saw a 10 per cent increase in GDP, an 11.5 per cent increase in 2005 and a whopping 15 per cent growth in GDP in 2007.

These figures indicate that China is moving towards the next phase of modern economic growth, however, it is not moving comfortably towards what’s next.

These sluggish growth rates can also have ripple effects on the world economy as several countries are still dependent on China’s manufacturing sectors.

With inputs from agencies.