China Economic Outlook. June 2024

Summary

We summarize the recent development of the Chinese economy and highlight the unbalanced economic structure. Risks include the housing market, geopolitics, deflation and unbalanced economic structure. We also analyze the ongoing fiscal and monetary policy coordination to stimulate growth.

Key points

• Key points:
• China’s 2024 Q1 GDP reached 5.3%, higher than the consensus and 2023 reading 5.2%, making our 4.6% 2024 forecast easy to achieve which is subject to upside bias.
• However, the economic structure is significantly unbalanced, with the supply side much stronger than the demand side.
• Look ahead, the ongoing recovery has not got a solid foundation yet as the deep adjustment of real estate and unbalanced economic structure remain the main risks.
• Risks focus on real estate, local government debt, deflation, supply chain relocation and geopolitics, but we think the systemic financial risks do not exist at the current stage
• Monetary and fiscal policy remains expansionary to support recovery but prioritizes fiscal stimulus amid weak sentiments as the transmission mechanism of monetary easing remains weak.

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