"China's Economy, Like a Mild Cold... Possible to Grow Over 5% Next Year"

Researcher at the Institute of Macroeconomic Research, Chinese Academy of Social Sciences
Presentation at the '2024 Han-Kung Economic Outlook Forum'

"Many experts compare China's economic situation to the 2008 U.S. subprime mortgage crisis or the 1990s Japanese real estate bubble collapse. However, when viewed against objective indicators, it cannot be considered to that extent. I would like to describe China's economy as having caught a mild 'cold.'

Tang Duoduo, a researcher at the Macroeconomic Research Institute of the Chinese Academy of Social Sciences, stated at the '2024 Korea-China Economic Outlook Forum' held in Beijing on the 6th, hosted by the Korea International Trade Association Beijing Branch and KOTRA Beijing Trade Center, during a presentation on 'China's Economic Outlook and Macro-Industrial Policy Directions,' "It is a fact that everyone feels the recovery of the Chinese economy is falling short of expectations," but added, "However, it differs from past crises in major countries, and currently China is undergoing deleveraging (debt reduction)."

Tang Duoduo, a researcher at the Macroeconomic Research Institute of the Chinese Academy of Social Sciences, is giving a presentation on "China's Economic Outlook and Macroeconomic and Industrial Policy Directions" at the "2024 Korea-China Economic Outlook Forum" held in Beijing on the 6th, hosted by the Korea International Trade Association Beijing Branch and KOTRA Beijing Trade Center. (Photo by Kim Hyunjung)

Researcher Tang explained, "GDP growth is trapped in a box range, consumption is weak, the stock market has entered an undervalued zone, real estate prices are plummeting with decreased transactions, and deposits are increasing," adding, "In this situation, many experts recall terms like deflation and liquidity trap, which appeared when bubbles burst in major countries." He continued, "However, the core pillars of China's economy, industrial and manufacturing loan growth, are noticeably recovering, and new energy vehicle sales records in September and October hit all-time highs," emphasizing, "Inclusive and green finance, as well as loans in advanced sectors, are also on the rise."

Regarding the recent slowdown in China's economy, he diagnosed it as a state of 'new triple overlap.' The new triple overlap refers to ▲transition phase of development stage ▲frequent external shocks ▲resolution of private leverage. Researcher Tang said, "China is in a transition from a high-speed growth phase to a high-quality development phase and is experiencing external shocks such as war and supply chain crises," adding, "In this situation, authorities focusing on government funds and public finance are not actively addressing private leverage resolution through fiscal and monetary policies."

Regarding China's GDP growth rate, he forecasted 5.3% for this year and over 5% for next year. He said, "There will be many difficulties in the short term, and if the consumer price index (CPI) inflation rate, which is concerningly below 2%, improves, signs of economic recovery will appear," adding, "According to my analysis, China will introduce more strengthened fiscal policies in the first half of next year." He further added, "Monetary policies need to be layered to provide additional measures to resolve private leverage." Regarding the Chinese stock market, he predicted, "In the short term, there is no opportunity in Chinese stocks," and "It will remain stable in this state."

He also expressed optimism about China's economy in the mid to long term, stating, "Large-scale state-owned enterprises will play a significant role in macroeconomic management, which is a unique strength of the Chinese economy," and "Compared to 30 years ago, there are more 'wealthy Chinese,' which is also positive." He added, "With them as the main actors, China has developed characteristics of quickly recovering from risks and becoming stronger."

In the subsequent discussion session, Lee Sang-hoon, head of the Beijing office of the Korea Institute for International Economic Policy (KIEP), addressed the market's 'Peak China' sentiment (the diagnosis that China's economy has peaked and entered a downturn), stating, "The economy cannot grow infinitely, and as its scale grows, it inevitably slows down at some point," and "Since this is not a risk unique to China, the 'Peak China' view is flawed." He added, "There is a forecast from the Chinese National New-type Urbanization Center that China's potential growth rate will decrease by 0.2 percentage points annually from 5.4% this year, and such a level of decline can be considered normal," further explaining, "Although there are real estate and debt issues, it is expected to achieve stable growth without a major crisis."

This content was produced with the assistance of AI translation services.