China’s economy is sputtering

In the latest indicators of China’s economic health, a confluence of falling bond yields, declining GDP growth and persistent consumer price deflation paints a concerning picture for the world’s second-largest economy. Throughout 2024, China’s GDP growth has been a subject of intense scrutiny, with estimates from China-skeptical Rhodium Group ranging between 2.4% and 2.8%. These figures starkly contrast with the official statistics reported by the National Bureau of Statistics (NBS), which indicated an annualized growth rate of 4.8% year to date through the third quarter. The divergence is most pronounced in the realm of gross fixed capital formation, where investment figures differ significantly, compounded by discrepancies in household consumption data.

This underperformance marks a pivotal shift in the narrative surrounding China’s economic trajectory. 2024 has been a turning point, where Beijing’s previously optimistic outlook has been tempered by a persistent post-COVID malaise. The government’s late acknowledgment of the need to bolster domestic consumption resulted in inadequate measures to salvage the year’s economic performance — even now, the government is trying to encourage people to buy more clothing and home appliances with a trade-in program. While Beijing continues to assert that it met its growth targets, skepticism persists both domestically and internationally, with organizations like the International Monetary Fund (IMF) hesitating to fully endorse the official figures.

Amid these challenges, China’s policy stance has begun to evolve. The government’s response has mainly involved short-term countercyclical support measures, which are expected to slightly boost growth in 2025. Projections suggest that GDP growth could edge from the 2%-3% range observed in 2024 to between 3% and 4%, with a possibility of reaching 4.5% should policy measures align favorably. But this anticipated improvement is viewed by many analysts

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