China's Q4 GDP shows modest uptick amid economic challenges: Report

China's economy is anticipated to exhibit a slight recovery in the fourth quarter, likely reaching a growth rate of 5.3 per cent, up from the third quarter's 4.9 per cent, as revealed by a Reuters poll.

Although this improvement aligns with the government's growth target, concerns loom over the economic outlook for 2024.

Challenges such as a prolonged property downturn and subdued consumer confidence contribute to the uncertain terrain despite various policy interventions.

While the yearly GDP growth is estimated to be 5.2 per cent for 2023, partially influenced by the low-base effect from the strict COVID-19 lockdowns in the previous year, the overall economic momentum is underlined by a sluggish quarterly growth rate.

The forecast suggests a fourth-quarter growth of 1.0 per cent, a deceleration from the 1.3 per cent pace observed in July-September.

This indicates persistent weaknesses despite policy measures taken to stimulate economic activity.

In 2022, China faced a significant economic setback, with a mere 3 per cent growth due to stringent COVID restrictions, significantly missing the official target.

The post-pandemic recovery has been challenging, marked by a prolonged property crisis, diminishing consumer and business confidence, escalating local government debts, and a globally feeble economic environment.

Despite setting a growth target of around 5 per cent for 2023, the Chinese government is expected to maintain a similar goal for 2024, highlighting the ongoing uncertainties.

Analysts polled by Reuters foresee a slowdown in growth to 4.6 per cent in 2024, with a further easing to 4.5 per cent in 2025.

This projection intensifies the pressure on policymakers to introduce additional stimulus measures, aiming to restore confidence and navigate through the persisting property market downturn.

Recent economic indicators, including deflationary pressures and subdued factory activity, suggest a challenging start for China in 2024.

Investor dissatisfaction with China's performance in 2023 led to a weakened yuan currency and significant losses in the stock market.

The market capitalisation of stocks listed in Shanghai and Shenzhen experienced a cumulative drop of $258 billion during the year, while Hong Kong-listed shares lost $592 billion.

As the People's Bank of China (PBOC) pledges enhanced policy support for 2024, some surprises emerged when the central bank kept the medium-term policy rate unchanged, contrary to expectations for a cut.

Analysts anticipate the PBOC to eventually implement policy rate cuts and a reduction in the one-year loan prime rate (LPR) in the first quarter of 2024 to bolster economic growth.

The government is also likely to persist with fiscal spending, building on the 1 trillion yuan sovereign bonds unveiled in October for investment projects.

(With inputs from Reuters)