Beijing, China – China, the world’s second-largest economy, is expected to reveal its weakest annual economic growth in over three decades when data is released on Wednesday, reflecting the toll taken by a severe property crisis, sluggish consumption, and global uncertainties.
A panel of ten experts interviewed by AFP anticipates that China’s gross domestic product (GDP) likely expanded by 5.2 percent in 2023, marking the slowest growth rate since 1990, excluding the pandemic-induced downturn. While an improvement from the 3 percent recorded in 2022, business activity that year was severely impacted by stringent health measures to combat the COVID-19 virus.
After lifting these measures, Beijing set a growth target of “around five percent” for 2023. However, as the year unfolded, the eagerly awaited economic rebound lost momentum due to lingering consumer and business confidence issues, exacerbated by an unrelenting real estate crisis, soaring youth unemployment, and a broader global economic slowdown.
“The main challenge for China’s economic recovery still stems from the property sector,” remarked Jing Liu, chief economist for Greater China at HSBC.
China’s property sector, traditionally accounting for about a quarter of the nation’s economy, witnessed extraordinary growth over two decades. However, financial troubles at major firms like Evergrande and Country Garden have eroded buyer trust, amid unfinished housing projects and falling prices. The drop in property values has particularly hit hard the wallets of Chinese citizens, who have historically considered real estate a safe investment.
“Real estate investment, dwelling prices, and new dwelling sales are set to fall throughout 2024 before returning as a modest driver of growth in 2025,” explained Harry Murphy Cruise, an economist at Moody’s ratings agency.
In addition to the real estate crisis, challenges such as “sluggish labour market conditions” are dampening consumer confidence, noted Helen Qiao, head of Asia Economic Research at Bank of America. In May 2023, more than one in five individuals aged 16 to 24 in China were unemployed, according to officials.
The recovery has been uneven, with services benefiting more than other sectors. Although customers have returned to restaurants, transportation, and tourist sites, the spending levels often remain below those observed in 2019, before the pandemic.
A positive development has been observed in the state-subsidized auto sector, where a surge in electrification has supported domestic manufacturers like BYD. BYD surpassed Elon Musk’s Tesla as the world’s best-selling EV maker in the fourth quarter of the previous year.
Nevertheless, challenges persist, particularly in the industrial sector, weakened by declining demand domestically and abroad. Chinese exports, historically a key growth driver, experienced a decline last year for the first time since 2016, attributed partly to geopolitical tensions and Western efforts to reduce dependence on Beijing.
As China anticipates slowing growth to 4.5 percent in 2024, according to World Bank forecasts, the nation faces a complex economic landscape. The average prediction by AFP’s expert panel is 4.7 percent, with Beijing expected to announce its new growth target in March. The challenges encountered in 2023 are likely to continue playing a significant role in shaping China’s economic trajectory in the coming year.