A large advertisement promoting China's “barter” policy hangs outside a housing construction project in Nanjing, China, on November 29, 2024.
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Data and company earnings show that China's latest efforts to stimulate growth have not had a widespread impact yet, suggesting that the world's second-largest economy will not bounce back soon.
Growth in sectors from real estate to manufacturing has improved since Beijing began announcing stimulus measures in late September. However, companies have maintained a cautious tone when sharing forecasts in the past few weeks.
When asked on an earnings call on Friday about the impact of the stimulus, the food delivery giant Meituan The company said only that in October, the average value of hotel orders in its new travel booking business fell less than in previous months, year-on-year.
“Although it will take some time for the positive impact to be fully realized and extend to more consumption categories, we are confident that these policies will gradually provide more support to the real economy and stimulate consumer spending, providing more growth opportunities for the real economy.” Our business,” said Xiaohui Chen, Meituan’s chief financial officer and senior vice president, according to a recording of the earnings call.
Executives from an e-commerce company Alibaba And social media player Tencent They shared similar comments last month on their earnings calls, saying the stimulus would take time to translate into growth.
The intensification of stimulus measures aims to reach this year's official target of around 5%, and at a similar pace next year – while preventing financial instability, Gabriel Wildau, Teneo's general manager, said in a note on Monday. For him, the tone of the economy suggests that “technological self-sufficiency and national security remain top priorities” for China.
“Looking ahead, our sources expect that stimulus in 2025 will flow in a gradual, data-driven manner,” Wildau said. “The guideline will be ‘as much is enough’ rather than ‘whatever it takes’.”
Preliminary economic indicators for November reinforce the picture of improving, but not explosive, growth.
The Caixin Manufacturing PMI showed further expansion in factory activity with a reading of 51.5, the highest reading since June, according to LSEG data. The official PMI came in at 50.3, the highest level since April. Retail sales and industrial data for November are scheduled to be released on December 16.
The Caixin Industrial Employment Gauge showed employment contracting for the third straight month in November. This indicates that “the impact of the economic stimulus has not yet appeared in the labor market and enterprises' confidence in expanding the workforce needs to be strengthened,” Wang Qi, chief economist at Caixin Insight Group, said in a report.
“While the economic downturn appears to have bottomed out, it needs to be further strengthened,” Wang said, noting the growing risk of “external uncertainties.”
The United States on Monday issued another round of restrictions aimed at restricting Chinese chip makers. President-elect Donald Trump last week announced plans to impose 10% tariffs on all US imports of Chinese goods once he takes office in January.
“Markets will be salivating for more and more stimulus as the geopolitical temperature rises,” according to a survey by US-based consultancy China Beige Book of Chinese companies released on Monday.
The company conducted a survey of 1,502 companies from November 14 to 26, and found that retail spending improved compared to last year, along with home sales, despite “widespread” weakness in services consumption. The report also noted that the share of participants in borrowing rose to its highest levels since May 2022, indicating rising demand.
“Beijing’s stimulus measures encouraged companies to move away from the sidelines this month,” the report said. “But it is unlikely to continue without pledges of additional support.”
China's Ministry of Finance said more financial support could come next year. Investors are also awaiting details of China's annual economic planning meeting, which is usually held in mid-December.
