“China’s Q4 growth forecast rises to 5%, but tariffs and weak domestic demand loom large.”, — write: www.fxempire.com
“The priority of macroeconomic policy should shift from promoting more investment in the past, to promoting both consumption and investment, with more importance attached to consumption.”
On January 15, CN Wire reported news of China implementing a trade-in policy for mobile phones, tablets, and smartwatches from January 20. The move could be the first step in many to boost consumption.
However, economists have raised concerns about China’s economic outlook and the need to change the economic model. Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on China’s challenges to shift to a consumption economy. She stated:
“Xi Jinping’s ideological opposition to European-style “welfarism” is among the reasons that China is locked into its state-subsidised, export-led industrial model. It’s not so easy to boost domestic demand. They would need to radically change their economic model.”
Inflation, Retail Sales, and Unemployment: Crucial Data Points China’s December inflation figures highlighted the difficulties in boosting consumption. The annual inflation rate slowed from 0.2% in November to 0.1% in December.
Garcia Herrero remarked on the December inflation numbers:
“China’s economic slowdown has been accompanied by increasingly pronounced and prolonged deflationary pressures. The latest release of inflation data for December 2024 confirms this concerning trend, driven by the lack of domestic demand.”
Upcoming unemployment and retail sales figures on January 17 will give further insights.
A marked rise in retail sales and lower unemployment could paint a rosier outlook. However, consumer sentiment remains weak. In November 2024, sentiment dropped to near all-time lows, suggesting more meaningful measures are needed to boost confidence. Without this, China’s economy remains exposed to US tariffs and global protectionism.