China’s Economic Challenges Intensify: Can Policy Changes Revive Growth?

China's recent economic policies are unlikely to significantly boost its struggling economy, according to Haibin Zhu, chief China economist at JPMorgan Chase.

He argues that these measures focus on short-term risk mitigation rather than fostering substantial growth. Despite recent rate cuts and initiatives, skepticism persists about the government’s willingness to implement more extensive fiscal measures.

China’s ambitious 5% growth target for 2024 appears increasingly unattainable amid weak consumer spending, uncertain exports, and a shaky property market. Initial optimism following late September’s stimulus measures has faded, revealing they fell short of investor expectations.

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Signs of deflation and concerns of prolonged stagnation, reminiscent of Japan’s past, are emerging, with many global banks predicting China will miss its growth target.

The service sector, which accounted for 48% of jobs last year, is often overlooked as the government focuses on enhancing manufacturing. Consumer confidence has plummeted to an 18-month low, and while exports are at a nearly two-year high, resistance to cheap Chinese goods from various countries complicates the recovery.

With domestic confidence shaken and bank loans contracting, it’s imperative for Beijing to deliver concrete results to avoid further disappointment.

Alexander Stefanov