According to a report by Bloomberg, out of the 74 analysts tracked, 51 estimate that China’s economic growth rate in 2024 may fall below 5%, and some economists even warn of the possibility of a “slow implosion” of the Chinese economy.
Over the past two years, the real estate crisis has dragged down all aspects of the Chinese economy, from the job market to consumption and household wealth.
The measures taken by the authorities to restore investor confidence have been too slow and too small, leading to a prolonged decline in the Chinese stock market. The Shanghai and Shenzhen 300 Index, which tracks onshore Chinese stocks, has fallen by 4.2% so far in 2024, marking the fourth consecutive year of decline. In comparison, the broader Asian stock index has risen by nearly 10%.
This impact has spread to broader financial markets and has engulfed individual investors as well. According to the mainland media “China Securities News,” nearly half of the 27 closed-end three-year mutual funds launched in 2021 faced losses of over 40% towards the end of the cycle.
Bloomberg reported that Wang Yan, a strategist at Alpine Macro, who recently returned from China, believes that achieving the 5% economic growth target is “almost impossible,” and he also warned of the risk of a “slow implosion” in China’s future.
He stated that Chinese policymakers lack a clear, coherent strategy to address challenges, and even the current “piecemeal measures” to address demand issues are temporary and indecisive.
UBS Group downgraded its forecast for the Chinese economy on Wednesday (28th), deeming it increasingly unlikely to achieve the 5% economic growth target this year. The Swiss bank revised its forecast for China’s GDP growth this year from 4.9% to 4.6% and from 4.6% to 4% in 2025.
Prior to this, both JP Morgan and Nomura Securities had also forecasted China’s economic growth for this year to be below 5%.
Bloomberg stated that this reflects a consensus forming among major banks globally that China may not be able to achieve its annual growth target, despite the top leadership of the Communist Party still propagating its commitment to achieving “economic and social development goals.”
The slump in the real estate market has severely affected domestic demand and confidence.
UBS economist Wang Tao wrote in a report on Wednesday: “We expect that the weak performance in real estate activities will have a greater drag on the overall economy than previously expected, including impacting household consumption.”
UBS stated that the measures rolled out by Beijing since the end of 2022 to revitalize the real estate market, including lowering down payment requirements, reducing mortgage rates, and easing home purchase restrictions, have progressed slowly with limited impact.
They project that new construction in the Chinese real estate market will bottom out by the mid-2026. “In recent years, the supply and demand fundamentals of the Chinese real estate market have changed, with weak growth in household income, low market confidence, high inventory levels, and slow destocking implementation,” the UBS report said.