BEIJING — China’s economic performance exhibited signs of recovery in the initial months of the year, though challenges persist, particularly in the housing market which continues to hamper growth. The Chinese government has announced steps aimed at encouraging greater consumer expenditure.
Retail sales increased by 4% during January and February compared to the previous year, surpassing predictions. Meanwhile, industrial production grew by 5.9%, as reported by the National Bureau of Statistics. This unexpectedly strong data provided a boost to Asian stock markets.
A spokesperson from the bureau emphasized the positive direction of economic activity but acknowledged prevailing domestic and international challenges. The imposition of a 20% tariff on Chinese products by U.S. President Donald Trump poses a threat to China’s export-reliant economy. Trump reaffirmed plans to further escalate tariffs by early April.
Fu Linghui noted the complex and adverse external environment. Additionally, domestic demand remains inadequate, and some companies continue to struggle with operational difficulties, making the foundational economic recovery fragile.
A protracted real estate slump continues to exert pressure on the broader economy, negatively affecting consumer confidence and spending patterns. Real estate investment dropped by 9.8% in the first two months, according to the statistics bureau.
Encouragingly, the rate of decline in real estate prices has slowed, although they have not yet stabilized. Both new and existing home prices decreased in early 2023, but the slowdown was less pronounced compared to most of last year.
ING bank anticipates a halt in real estate price declines this year, but rapid recovery is not expected. “The recent data suggests that policy support should not be prematurely withdrawn,” noted Lynn Song, ING’s chief economist for Greater China.
On Sunday, the government and the ruling Communist Party unveiled a strategy to enhance consumption, featuring measures to bolster disposable incomes and expand benefits such as medical insurance and pensions, as reported by the official news agency.
The central government allocated a preliminary sum of 81 billion yuan ($11.2 billion) to local authorities in January. These funds are intended as rebates for individuals trading in outdated vehicles or appliances. Moreover, the rebate initiative, in its second year, is projected to expand to 300 billion yuan by 2025.
Planned initiatives also include the development of AI-driven products, like autonomous vehicles and smart wearables, as well as promoting winter tourism in snow-prone areas. These efforts aim to stimulate consumption and diversify economic growth.
Che Shiyi of the People’s Bank of China highlighted the central bank’s commitment to employing a range of mechanisms to ensure market liquidity. The bank is also exploring new methods to facilitate low-cost funding in critical consumption sectors.
