barring unpredictable events, how do you see the chinese economy faring in 2024?
Chinese Economics Thread
- Thread starter Norfolk
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As a review of my 2023 predictions:
I initially projected 5.5% GDP growth - in reality this came in at 5.2% with 2 caveats: 1) The country reduced actual 2022 GDP by about 548bln rmb, providing an easier comparable for 2023 growth data; 2) The Central Government increased budget deficit by 1 trln of special purpose bonds used for disaster relief.
The critical takeaway here is that growth in 2023 was below expectations of 1) everyone on this forum (go read your own posts from Jan 2023); 2) most economists for major banks; 3) and most importantly, the central government itself. The last part of this is the most important as otherwise they would not have added the 1trln of stimulus in the middle of the year.
Going forward for 2024 I will say 5% but with a lot less certainty - this of course is going to be very much dependent on how much more stimulus is being done - the outlook for 2024 is going to be a lot less certain than it is for 2023 given this specific issue.
How much additional central government bonds will they issue? What about PSL capacity by the PBoC? Where are they on solving LGFV issues? What about urban village renovation? When will the 3rd plenum happen? What comprehensive reforms will they announce as part of that?
Nobody actually knows the answers to these questions and so I'm personally taking a observe and pivot mindset.
My final point here to everyone on the forum with an interest in Chinese economics - just because you don't like the data doesn't mean the data isn't real. Otherwise you are no better than Western media for calling Chinese data fake.
I think I predicted it quite well, the government said it would be around 5% and that's what happened. I expect they'll target above 5% again for this year and they'll do whatever is necessary to achieve that target. It won't surprise on the downside, but could potentially be a bit higher if the world economy recovers
Headline numbers aren't of primary importance. More important is where China's industrial upgrading is. How SOEs and companies in critical sectors like semiconductors and advanced manufacturing are doing. How much import substitution at the technological cutting edge is occurring.
RE and LGFV's decomposing corpse stinking up the joint is a secondary consideration.
Wall Street shoots money out of a fire hydrant at American companies - no questions asked - while Chinese companies with great performance purely on finance's favoured profitability metric get hammered.
RE and LGFV's decomposing corpse stinking up the joint is a secondary consideration.
I have a serious question since you seem to work in finance. Why isn't the US president expected to announce comprehensive reforms as part of a plenum? How come all this is expected of just China?
Wall Street shoots money out of a fire hydrant at American companies - no questions asked - while Chinese companies with great performance purely on finance's favoured profitability metric get hammered.
manqiangrexue
Brigadier
1. Oh no, China has too many unemployed youth!
2. Oh no, China's population is getting old so there's not enough young people to work.
This actually shows that China's economy is moving to machine labor fast enough to offset any population decline. Unlike the US, China's youth unemployment stems from too many educated people qualified for higher ranking oppertunities unwilling to do menial labor unless their livelihoods depended on it (or with menial labor saturated by the less educated). America's youth unemployment is centered in people just not wanting to work at all and the economy not providing any jobs that are easy and lucrative enough to change their minds.
There is no problem in data itself, it's just what is the importance level of that data presented that is the issue. Since coming here, all the so-called negative data I saw about China are basically non-threats or non-factors, that could be very easily solved if they became actually dangerous, and have very strong arguments for them being easily way less important than the Western schizophrenics present it as (around 5 counter-arguments per point).
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Because the S&P 500 Index is up ~11% CAGR in the past 10 years and 9.6% CAGR in the past 20 years. The economic/social/political rot in the US has not impacted financial performance of Fortune 500 companies. Therefore investors are happy to buy more stocks. Investing in the S&P 500 is almost religious (go read the finance bloggers like Morgan Housel etc) among the investor class in the US. Not "announcing comprehensive reforms" is the feature, not bug, of the American capital markets.
Now of course that could change when the chicken comes home to roost and the US implodes and we unravel. But the two most important things in investing/finance:
1) The market can stay irrational longer than you can stay solvent;
2) Being early is no different than being wrong.
So while I understand why everyone here wants to experience the mental orgasms from imagining China becoming #1, it is important to live in the present and not in the potential future.
Before anyone tells me that only the top quintile or so in the US owns equity assets - like yes, do you think this is any different than in China? Probably only 10% of people in China care about the stock market - but you, being an English speaker with access to SDF - with free time to opine on issues discussed here, are in the top quartile if not top decile of society. (Accessing SDF in China requires a VPN, which costs over 100 USD/yr).
As well, consumption is largely a rich people business - The top quintile of Americans contributed to about 45% of Personal Consumption Expenditures; whereas the top 1/3 of Chinese contribute to about 50% of Chinese consumption (retail sales as a proxy). Guess what, pissing off the rich people by enacting necessary reforms isn't conducive to them investing/consuming.
I've made this point many times, but the good parts of the economy aren't big enough yet to offset the bad parts. Personally know someone senior at Huawei who just upgraded to an 800k rmb car this year - clearly feeling great (rightfully so) about their future prospects. But someone of a similar age at Vanke or Country Garden would not feel the same.
The biggest issue is the low birth rates. It needs to be between 15 to 20 million births per year. Numbers released for 2023 was 9 million births. You can’t have a declining population.
Married couples are having children. But marriage rates have declined. Therefore the birth rates have declined with it.
Subsidies and other incentives need to be introduced in a much larger scale. Give advantages to women that have children. More children they have, the more advantages they get. The advantages need to be significant.
Robots and automation will solve the labour supply shortages but it’s the demand side that is the problem. You need humans to buy goods and services provided by companies. Robots don’t buy home appliances, phones, cars, furniture, travel, etc.
If the marriage rates increase, you will see birth rates increase. I believe the declining marriage rates has been the biggest cause.
Married couples are having children. But marriage rates have declined. Therefore the birth rates have declined with it.
Subsidies and other incentives need to be introduced in a much larger scale. Give advantages to women that have children. More children they have, the more advantages they get. The advantages need to be significant.
Robots and automation will solve the labour supply shortages but it’s the demand side that is the problem. You need humans to buy goods and services provided by companies. Robots don’t buy home appliances, phones, cars, furniture, travel, etc.
If the marriage rates increase, you will see birth rates increase. I believe the declining marriage rates has been the biggest cause.
It is indeed irrational because only 7 companies are carrying the whole SP.
What we are witnessing now is the greatest concentration of wealth among the fewest people ever. Yet little is being spent by businesses with low 40 PMIs.
Secondly on Retail Sales:
I had initially expected 2023 retail sales growth to be ~8% off of a low base in 2022, but clearly that was overly optimistic. Considering the sentiment on the forum lambasting me for suggesting 8% as too conservative, I think it is clear folks here need to get their mind right when it comes to assessing the data.
Before someone gives me the "Chinese consumption is understated" lecture - I know the argument but I don't make the rules of how the government defines retail sales.
It is extremely clear that the so called 'pent up savings' people were hollering about was a function due to much lower propensity to spend/consume - as a result of overall precautionary outlook on the economy. As well, a lot of 'wealth' in China is tied up to real estate - so when real estate prices drop, people feel less wealthy - and then reduce consumption.
Moreover, virtually all local governments were struggling with budgets so they cut back expenditures as well. Small/medium businesses are also struggling - you can tell from the struggles of the superpremium baijiu consumption (your Swellfun/Shede/King's Luck of the world).
For 2024, I would expect retail sales to be in-line with disposable income growth, which is somewhere in the 6% range. But again, given how much uncertainty there is going forward with respect to economic growth (policy questions I raised in my previous post) - this is to be taken with a huge grain of salt.