The Chinese economy has not yet completely emerged from the pandemic as a new year dawns

Tanneur Brown

Weak consumer demand is just one of many factors weighing on the economy as the calendar shifts from 2024 to 2025, even after policymakers implemented stimulus measures throughout the past year.

This month offers a particularly good time for reflection in China, both for consumers, families, small businesses and investors. The New Year holiday, celebrated around the world, and the Chinese Lunar New Year both fall in January.

The pervasiveness of change in the atmosphere has plunged some citizens into an intense period of contemplation – and this, after China's economy repeatedly failed to meet expectations on almost every major growth indicator in 2024.

In MarketWatch's conversations with a dozen Chinese workers, students and retirees, one thing became clear: They are happy that last year is behind them. For most, it was still a year after the coronavirus pandemic, marked by stagnant wages or job losses, a decline in the value of their homes and a tightening of wallets for non-essential items that, it just a few years ago, would have seemed easily accessible.

Reflections on the year ahead were mixed. Many have expressed hope that policymakers will launch powerful stimulus packages or that the country's new normal of slower growth will be just a moment of sluggishness that will be overcome, returning the world's second-largest economy to its usual annual growth rate at two digits.

“I know my customers, and they're not doing particularly well financially,” said Wu Lingling, 38, who sells phone accessories on most of China's myriad e-commerce channels, including the main trio that is Alibaba's Taobao; JD.com; and PDD, also known as Pinduoduo.

“But they told me that they are biding their time until things improve for the country's fortunes,” Wu said via video call from his home in China's Anhui province. is from China.

This optimism might be wishful thinking. President Xi Jinping has favored Communist Party ideology over economic pragmatism, sparking concern among independent economists and discontent within the party. But even Xi was forced to publicly acknowledge the country's underperformance.

“The current economic operation is facing new situations, there are challenges due to the uncertainty of the external environment and the pressure of transformation of new and old factors, but these can be overcome through a hard work,” he said in his New Year’s Eve speech broadcast on national television.

Looking at GDP growth figures for the first three quarters of 2024, it seems unlikely that policymakers will meet their target of “nearly 5%” expansion for the year.

While the World Bank revised its growth forecast for 2024 to 4.9% from 4.8%, analysts at research firm Rhodium Group wrote this week that the expansion would likely have been much weaker for the year, placing the figure between 2.4% and 2.8%.

Unemployment has failed to fall below the 5 percent threshold that top leaders traditionally view as a ceiling, while youth unemployment has soared to nearly 20 percent, meaning that about one Chinese in five aged 16 to 24 cannot find work.

Beijing-based Lizzie Yan, 22, graduated in June from China's most prestigious university, Peking University, but has failed to find work to match her once-high degree. appreciated. “I could get a job at a fast food restaurant, but I think that would only make my resume worse,” she told MarketWatch.

By far the main drag on the economy is the spiraling real estate market, where investments plunged 10.4% in 2024 compared to the previous year in the first 11 months of the year, according to the National Bureau statistics. Real estate is the most common form of investment for Chinese, so the collapse in property prices across the country has drained billions of dollars from household net worth.

Beijing has worked to stem this economic unrest. In September, authorities rolled out several stimulus measures, including support for the real estate sector and a $1.4 trillion plan to help local governments deal with their long-standing debt problems.

But what angers experts and the general public most is the stubborn crisis in consumer confidence and the government's lack of support for demand-side relief.

“The government has been saying for almost a year that it will help us who are in difficulty,” said Xu Leiyu, a 42-year-old woman from Chengdu, in the west of the country, who lost her job in a mobile phone store two months ago. There is. “But I haven’t seen any support.”

At a high-level meeting last month, senior officials specifically announced that they would deploy aid to boost consumption, but no further details were provided and nothing has been implemented since.

Weak consumption and a lack of inflation across the country have led to deflation – hitting a five-month low in November – which has dampened wages and corporate profits.

“We believe deflation will continue in China, particularly based on previous experience with trade wars,” Becky Liu, head of China macro strategy at Standard Chartered Bank, wrote in a note. recent.

Tanner Brown covers China for MarketWatch and Barron's.

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