China to grow by 4.8% in 2024, as economic momentum fails to pick up

September 29, 2024

China’s growth momentum weakened further in August driven by a softening of investment and continued declining consumption amidst low confidence levels. The only bright spot were exports, but external demand for China-made products is likely to moderate because of trade tensions and slower growth in major economies. As a result, we have revised down our 2024 growth forecast from 5.0% previously to 4.8%. Given China’s current economic conditions and policy trends, we expect the market to continue being characterized by weak spending and price-based competition leading to downward pressures on profits.

Trusted Insights for What’s Ahead™

• Status of China’s Economy: Key economic indicators came in weak in August
  Both production and consumption softened, reflecting weak domestic demand. Despite the recent announcement of a slew of supportive measures, the slowing growth momentum suggests the risks to growth are tilted to the downside. Against this backdrop, we revise down our GDP forecast for 2024 from 5.0% to 4.8%.
• Investment Trends: Manufacturing investment remains robust, while infrastructure investment moderates and property investment contracts
  Fixed asset investment (FAI) declined to 3.4% y-o-y in Jan-Aug, down from 3.6% in Jan-Jul, due to contraction in property investment and a continued moderation in infrastructure investment; the main contributor to FAI is still manufacturing investment (9.1% in Jan-Aug). Infrastructure and manufacturing investment are expected to pick up speed in the next months.
• Consumption Trends: Weak consumer confidence leaves a modest outlook for consumption
  Retail sales growth slowed to 2.1% in August, from 2.7% in July, due to a less favorable comparison base the same period last year and a deceleration in sales of goods, indicating continued weakness in domestic demand. We believe Chinese consumers will overall remain risk-averse and price-sensitive as long as the underlying factors dragging down confidence levels are not addressed. While hospitality and travel-related industries will benefit from sporadic releases of pent-up demand, MNCs overall should be prepared for continued weakness in consumption.
• Trade Trends: Chinese export growth accelerated despite weakening external demand 
  Export growth accelerated to 8.7% y-o-y in August, up from 7.0% in July. The acceleration was fueled by a low comparison base, and because importers are front-loading orders to the US and EU ahead of tariffs and increased demand for the upcoming holiday season. Looking ahead, softening external demand in major economies and escalating trade tensions will weigh on China’s export outlook through H2 2024.