A massive ad promoting China’s “trade-in” initiative is prominently displayed outside a housing development in Nanjing as of late November 2024, capturing attention and optimism. But despite such bold moves and strategic efforts to jump-start growth, recent data and corporate earnings reports show the world’s second-largest economy isn’t quite bouncing back just yet.
There’s been some progress, notably in the real estate and manufacturing sectors, since Beijing began rolling out stimulus packages in late September. However, companies remain tentative in their projections, as evidenced by their careful language during recent earnings calls.
Take, for example, Meituan, a food delivery and services giant. In a call discussing their financial results, they acknowledged that October saw a slower decline in average hotel booking values compared to previous months when assessed year-on-year. Despite this modest improvement, Meituan’s CFO, Shaohui Chen, stressed that it would take more time for the beneficial effects of these policies to fully materialize and bolster consumer spending across a wider array of sectors.
Similar sentiments were echoed by big names like Alibaba and Tencent during their earnings discussions, where they cautioned that any substantial growth from these measures would require patience.
The goal of these increased stimulus efforts is to hit an official growth target of around 5% this year and maintain a similar trajectory next year, all while avoiding financial pitfalls. Gabriel Wildau from Teneo pointed out that the economic focus remains chiefly on technological self-sufficiency and national security, according to his latest analysis. He anticipates that moving into 2025, stimulus will be strategically dispensed in a manner that’s responsive to evolving data rather than a blanket approach.
Initial figures for November suggest an optimistic but not overwhelming picture of growth. For instance, the Caixin manufacturing PMI rose to 51.5, marking its peak since June. The official PMI was slightly lower at 50.3, the best since April. Further details on retail sales and industrial output for November are expected soon.
Despite these encouraging signals, Caixin’s data on manufacturing employment revealed that it continued to shrink for the third consecutive month. According to Wang Zhe from Caixin Insight Group, this trend indicates that the stimulus has yet to significantly impact labor markets or bolster business confidence in workforce expansion.
While the economy seems to be stabilizing, Wang cautioned that external uncertainties pose a looming threat. These uncertainties were compounded by fresh U.S. actions against Chinese technology firms and President-elect Donald Trump’s announcement of impending 10% tariffs on all U.S. imports from China.
The ongoing geopolitical strain is likely to keep markets hungry for more stimulus, as highlighted in a report by China Beige Book. Their survey, conducted mid-November, found improvements in retail spending and home sales despite a continual dip in the services sector. Interestingly, borrowing reached its highest demand since May 2022, spurred by the government’s stimulus prompting businesses to act.
However, the report warned that without further commitments for support, these gains might be short-lived. Looking ahead, China’s Ministry of Finance hinted at the possibility of more fiscal aid next year. Investors remain alert, eagerly anticipating details from China’s annual economic strategy summit, usually held in December.
