Confounding most analysts' expectations, the world's
second-largest economy has struggled to mount a strong and sustainable
post-COVID pandemic bounce, burdened by the protracted real estate slump, weak
consumer and business confidence, and mounting local government debts.
Gross domestic product (GDP) grew 5.2% in October-December
from a year earlier, data from the National Bureau of Statistics (NBS) data
showed on Wednesday, quickening from 4.9% in the third quarter but missing a
5.3% forecast in a Reuters poll.
The pace was solid enough to ensure Beijing met its annual
growth target of around 5%, but analysts said the recovery remains shaky and
jump-starting activity in 2024 could be a lot more challenging.
"The recovery from COVID -- disappointing as it was --
is over," according to China Beige Book International's latest survey
released on Wednesday.
"Any true acceleration (this year) will require either
a major global upside surprise or more active government policy."
For the full-year 2023, the economy grew 5.2%, partly helped
by the previous year's low-base effect which was marked by COVID-19 lockdowns.
Analysts had forecast 5.2% growth.
Highlighting some loss of momentum late in the year, on a
quarter-by-quarter basis GDP grew 1.0% in October-December, slowing from a
revised 1.5% gain in the previous quarter.
Policy insiders expect Beijing will maintain a similar
growth target of around 5% for this year.
The head of NBS, Kang Yi, said at a press conference in
Beijing that China's 2023 growth was "hard won", but added the
economy faces a complex external environment and insufficient demand in 2024.
Stocks in China, already near five-year lows, fell after the
disappointing data as did shares in Hong Kong, while the yuan eased. The
currency has come under fresh pressure recently as market expectations grow
that policymakers will have to commit soon to more interest rate cuts and other
support measures.
"At present, our country's government debt level and
inflation rate are both low, and the policy toolbox is constantly being
enriched," Kang said. "Fiscal, monetary and other policies have
relatively large room for manoeuvring, and there are conditions and space for
intensifying the implementation of macro policies."
MIXED DEC DATA POINT TO SHAKY RECOVERY
December activity indicators released along with the GDP
data showed factory output growth quickened at the fastest pace since Feb 2022,
partly driven by stronger growth in automobile production, but retail sales
grew at the slowest pace since September and investment growth remained tepid.
Data on the property sector, once a key driver of the
economy, was far more grim.
China's December new home prices fell at the fastest pace in
nearly nine years, marking the sixth straight month of declines, NBS data
showed.
Property sales by floor area fell 8.5% for the year while
new construction starts plunged 20.4%.
"I think markets were disappointed they didn't cut
interest rates on Monday, but it seems they are thinking about more targeted
measures," said Woei Chen Ho, economist at UOB.
"The property issues are not fixed by broad-based rate
cuts."
On Monday, the central bank left the medium-term policy rate
unchanged, defying market expectations for a cut as pressure on the yuan
currency continued to limit the scope of monetary easing.
"The piecemeal rollout of support from mid-year has
done little to turn things around. It's clear that China's economy needs extra
stimulus," said Harry Murphy Cruise, economist at Moody's Analytics.
"Direct support for households could be the crowbar
needed to pry open wallets, but the prospect of such support has been a
nonstarter for officials in recent years. Instead, monetary easing and new debt
issuance for infrastructure, energy and manufacturing projects look more
likely."
YOUTH JOBLESS FIGURE RETURNS, POPULATION FALLS AGAIN
As businesses remained wary of adding workers in the face of
many uncertainties ahead, the nationwide survey-based jobless rate increased to
5.1% in December from November's 5.0%, NBS data showed.
NBS also resumed the publication of youth unemployment data,
which it had suspended for five months. The December survey-based jobless rate
for 16-24 years olds, excluding college students, was at 14.9%, compared with a
record high of 21.3% in June.
Recent data suggested the economy was starting 2024 on shaky
footing, with persistent deflationary pressures and a slight pick-up in exports
unlikely to kindle a quick turnaround in lacklustre factory activity. December
bank lending was also weak.
"While we still anticipate some near-term boost from
policy easing, this is unlikely to prevent a renewed slowdown later this
year," said Julian Evans-Pritchard, head of China Economics at Capital
Economics.
"Although the government met its 2023 GDP growth target
of 'around 5.0%', achieving the same pace of expansion in 2024 will prove a lot
more challenging."
Adding to concerns over China's longer-term growth
prospects, the country's population fell for a second consecutive year in 2023.
The total number of people in China dropped by 2.75 million to 1.409 billion in
2023, a faster decline than in 2022. - Reuters