Overcapacity in electric vehicles and other sectors, a weak real estate market and rising local government debt are likely to undermine economic recovery efforts and cast a dark cloud over China’s outlook for 2024. , leading economists and academics warned on Friday.
Liu Yuanchun, president of Shanghai University of Finance and Economics, said in a webinar that China could enter the new year with a stronger economic recovery, but the momentum may slow in the second half as risks to economic growth weigh heavily.
However, business confidence and real estate investment remain sluggish, and concerns about the sustainability of the recovery remain.
Liu, who was one of the selected economists called upon by Premier Li Qiang to provide policy recommendations at last week’s State Council meeting, urged the Chinese government not to set China’s 2024 growth target “too low.” .
“What you need to set up is [GDP growth goal] 4.5-5% to prove Western detractors wrong and instill confidence,” Liu said, adding that the economy still has immense potential to be tapped.
However, China will still have to contend with new and old risks next year as they could hinder growth, he added.
Liu said the Chinese government should consider new reform commitments at key political events later this year, inject positivity and address a number of challenges to continue building momentum.
Top Chinese Communist Party officials are expected to convene the third plenary session of the 20th Party Congress in the coming months, a gathering that typically focuses on economic issues. Hopes are high that the meeting will deliver strong measures to solidify the foundations of recovery in the coming months.
“Next year will bring even more risks. The problems facing the real estate sector have not resolved. House prices in Beijing and Shanghai are stabilizing, but not in Guangzhou and Shenzhen, and lower-tier cities are “We are facing uncertainty,” Liu added.
“We don’t know what the outcome of the developer default drama will be,” he added, warning that policymakers’ “indecision and inaction” would exacerbate the challenge.
Liu also said that the debt restructuring plan announced at the Politburo meeting in July “only alleviates some of the immediate predicament, but does not address the fundamental problem of how local governments typically borrow.” “We will not deal with it,” he said.
The Chinese government faces a “tremendous” challenge in resolving its local government debt crisis, according to US rating agency Standard & Poor’s.
Liu also said China’s unfettered surge in electric vehicle and battery production, as automakers and local governments launch new projects, could create new overcapacity problems and hinder growth. I warned you.
Over the past decade, China has seen a proliferation of 500 electric vehicle startups, but only 200 automakers have received production certification from Beijing.
“Small, poorly performing companies will not be able to survive, and many car and battery factories will be abandoned,” said Cao Hua, a partner at private equity firm Unity Asset Management.
Yu Chunhai, vice dean of the School of Economics at Renmin University of China, also questioned whether the economic boost was sustainable, as consumption contributed almost 95% of China’s gross domestic product (GDP) in the third quarter. I’m holding you.
“[That] Some types of retaliatory spending should be reduced, and sustainable progress should result in increased private investment,” Yu said.
Economists also renewed calls for more spending, including through direct cash transfers.
Ning Jizhe, former director of the National Bureau of Statistics, said in an op-ed in People’s Daily this month that policymakers should focus on promoting consumption, especially the purchase of homes and cars.
“While the data shows that the economy is improving, there is a huge gap between the data and how ordinary people feel about the economy and their lives,” Yu added.