China’s economy is showing modest momentum, but the baggage it will carry into next year and beyond threatens to thwart its ambition of toppling the US as the world’s largest economy.
The latest data dump from China shows its economy is developing modest momentum, putting it on track to meet its equally modest growth target for this year. It will, however, carry a lot of baggage into 2024.
Chin chin to getting back on track: President Xi Jinping at the Great Hall of the People in Beijing last month.Still, China’s authorities will be encouraged that the economy’s trajectory is improving and that the myriad of cautious stimulus efforts – interest rate cuts, measures to increase home sales and sales of home furnishings and other goods, more infrastructure investment and financial assistance to local governments and manufacturers – are starting to have an impact.
With the country’s biggest developer, Country Garden, appearing to fail to meet a deadline for an interest payment of $US15.4 million due by Wednesday this week at the latest – a default that would trigger cross-defaults on more than $US10 billion of its US dollar-denominated offshore bonds – it is a crisis that keeps expanding and deepening, and which appears to be weighing heavily on consumer confidence and the economy.
China needs a stronger pick-up in consumption and stronger global growth to absorb overcapacity in its factories if it is to carry the improved momentum into 2024. Instead, Xi has been focused on subsidising strategic sectors of advanced manufacturing and has made some cautious efforts to stimulate consumption, while trying to encourage a rebound in private sector activity and foreign investment.