Published March 2, 2024
HONG KONG: China was surely hoping to start the year off strong, looking to the massive Chinese New Year holiday for signs of economic recovery, especially ahead of its annual Two Sessions meeting starting on Mar 5 where the government will announce its growth target for 2024.
With annual exports falling for the first time in seven years and investment dragged by the property turmoil in 2023, consumption has become the key in stabilising China’s economic growth.
Official data showed a promising surge over the eight-day holiday, when hundreds of millions of Chinese returned to their hometowns or indulged in domestic tourism. Domestic trips and tourism spending exceeded 2019 pre-pandemic levels by 19 per cent and 7.7 per cent respectively.
Unfortunately, it will not be that easy to solve China’s woes. There is no solid evidence of improving consumer confidence.
NO SIGNAL OF A FULL REBOUND
Consumers spent less during the holiday this year with the average spending per trip down 9.5 per cent lower compared with 2019. The spending pattern showed consumers remain cautious about the economic outlook: More may be more willing to spend money on travelling and services as well as potential frontloaded purchases due to the holiday season, but they were not exactly loosening the purse strings.
There is no guarantee the rebound will last, nor has it been big enough to offset the sluggishness of big-ticket items, such as automobiles.
The Chinese economy now relies more on consumption as income has risen with a growing middle class, after a series of transformations from the export-driven growth model following its accession into the World Trade Organization to the investment-led model in infrastructure and real estate built on leverage.
But consumption still suffers from deceleration due to fading “animal spirits”, a term economists use to describe the sentiment and future expectations that drive consumers’ decisions. Households typically spend more and reduce savings when they feel optimistic about the future – a scenario that contributed to soaring inflation in many economies in the last few years.
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SOURCE: www.channelnewsasia.com
RELATED: US says falling trade with China could be positive
Published March 2, 2024
The steep drop in trade with China could be a positive development, the United States’ top trade official has told the BBC.
Katherine Tai said it “isn’t necessarily negative. It could be a positive indication of diversification on both sides.”
The amount of goods the world’s two biggest economies sold to each other fell 17% last year.
It comes amid deepening divisions in the global economy.
Those differences were exposed again with the US announcing an investigation in to what it said was a potential national security risk from cars made in China, citing fears that tech-connected cars could collect personal data or be controlled remotely.
Chinese car companies have been expanding their presence in other parts of the world but have virtually no presence in the US, where they already face import duties of 25%.
The White House described its action as “unprecedented” and a fair response to Chinese policies which impose restrictions on foreign car companies.
Last year the amount of goods the US bought from China fell just over 20% to $427bn, with a 4% fall the other way to just under $148bn (£117bn).
Consumer electronics, machinery and clothing have been some of the biggest sellers in recent years.
Trade between the two hit a record high in 2022 but has fallen as many big US companies move production outside of China and feel the impact of tariffs.
Amid growing tensions between the two countries, trade expert William Reinsch of the Centre for Strategic and International Studies says: “Last year’s decline in U.S.-China trade does appear to be a sign that both economies are moving away from each other”
“But if you look at the increased imports from Southeast Asia into the United States, it appears that a good part of that increase is coming from Chinese companies that have either moved production or are simply moving their products through third countries in order to circumvent tariffs or other restrictions.”
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SOURCE: www.bbc.com
