As the threat of looming tariffs and sanctions expected to be imposed upon China by the US once Donald Trump officially assumes office in January persists, the Chinese Economy has begun to show early signs of recovery from its long-lasting meltdown.
This recovery is a sign that the Chinese government’s economic stimulus aimed at boosting the economy is beginning to bring rewards to the country’s faltering economy which has been in a slump since the Covid-19 epidemic hit the world.
Chinese Economy Decline
Since the end of COVID-19, the Chinese economy has failed to hit its pre-covid heights due to the property and real estate slump it has had to battle with. This is in addition to weak consumption power amongst its citizens who on the advice of the Chinese government had invested their entire income in purchasing properties not anticipating the slump that would befall the property sector.
The Chinese manufacturing sector also slowed greatly leading to widespread unemployment amongst the country’s population while the private sector emerged from Covid-19 more subdued than ever.
Economic Stimulus
In a bid to reenergize the chinese economy, the chinese government introduced a range of economic stimulus including a swap and relending scheme as well as the injection of a $1.4 trillion package to help local governments restructure their finance.
The Chinese government also introduced a cash-for-clunkers-like program whereby the Chinese government has been subsidizing purchases of equipment, appliances and cars in a bid to encourage purchase among citizens.
Early Recovery Signs
Chinese stimulus efforts look to be bearing fruits as recent checks with Bloomberg revealed the Chinese government’s injection of economic stimulus has been enough to keep the country’s 2024 economic growth target of about 5% in sight.
Due to the government’s Cash-for-chunkers like program, Retail purchases soared by 4.8% in October 2024 in comparison to one year before. As a result of this policy, sales of home appliances rose 39% compared to the same period last year, the fastest growth since 2010.
However, the Real Estate sector’s recovery was slower as property investment fell 10.3% in the first 10 months of the year, suggesting sustained subdued confidence among developers despite an initial recovery in housing sales.
However on a positive note, home-price declines moderated for a second month in October, aided by the recent policy support.
What Next For China?
The Chinese economy would be seeking to rebound as soon as possible especially by reviving its real estate sector which contributes an estimated 30% of the country’s GDP.
The word’s second biggest economy would however have to hope for the best as Donald Trump assumes office in January with the threat of increased tariffs for China.
For now, the Chinese Government would have to focus on stabilizing its economy to enable it compete globally.
