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China faced a complex economic landscape as its economy expanded by 5.2% in 2023, while the population saw a decline of 2 million. These contrasting figures underscored the ongoing challenges posed by a slowing property market and demographic pressures on the world’s second-largest economy.
Official data released on Wednesday revealed that China’s economic growth in the fourth quarter, while slightly below analysts’ expectations, allowed Beijing to achieve its annual 2023 growth target, overcoming hurdles earlier in the year. Quarter-to-quarter, GDP saw a 1.0% increase in October-December, aligning with expectations and showing a slight dip from the revised 1.5% gain in the preceding quarter.
“The headline GDP figures notwithstanding, we think the data are consistent with a slight improvement in momentum recently. But the recovery clearly remains shaky. And 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.”
This growth surpassed the 3% recorded in 2022, a year marked by Beijing’s stringent zero-Covid restrictions. Despite economic resilience, China’s population contracted for the second consecutive year, with official statistics indicating a 2 million decrease.
The recorded 11 million deaths surpassed the 9 million births in 2023, continuing a trend that began in 2022 when the population fell by 850,000. Demographers anticipate this decline to persist as China undergoes rapid aging.
In response to the data release, Chinese equities experienced a downturn. The Hang Seng China Enterprises index in Hong Kong dropped by as much as 3.1%, down approximately 10% for the month. The Hang Seng Mainland Properties index also fell by 4.5%, while the CSI 300 index of Shanghai- and Shenzhen-listed stocks saw a 1% decline.
Additionally, a separate report highlighted challenges in China’s real estate sector, as new home prices experienced the sharpest decline since February 2015 in December. This marked the sixth consecutive month of decreases, reflecting ongoing issues due to weak confidence.
New home prices dropped by 0.4% month-on-month, following a 0.3% dip in November, with calculations based on National Bureau of Statistics (NBS) data indicating a 0.4% decline from a year earlier – the steepest decrease in nine months after a 0.2% fall in November.
“China’s economic recovery will mainly depend on the timing of property recovery. Property investment contracted 9.6% in December2023. The timeline of property market stabilisation remains uncertain. We are still cautious on China’s growth outlook and forecast GDP growth of 4.2% in 2024,” said Raymond Yeung, Chief Economist Greater China at ANZ.