Economic Outlook for China

By Kevin Yao

BEIJING (Reuters) – China's economy is expected to grow by 4.8% in 2024, falling short of the government target, and may further cool to 4.5% in 2025, according to a Reuters poll. This poses ongoing pressure on policymakers to consider additional stimulus measures.

The Gross Domestic Product (GDP) is anticipated to have risen 4.5% in the third quarter year-over-year, down from 4.7% in the previous quarter, marking the slowest growth since early 2023. The poll was conducted from Sept. 27 to Oct. 15.

In an effort to revitalize the sluggish economy, authorities have significantly increased policy stimulus since late September, aiming to meet the government's 5% growth target for the year.

> "The main pressure is from the consumption side, which is linked to deflationary pressures," stated Xing Zhaopeng, ANZ's senior China strategist.

Xing predicts a rebound in economic activity in the fourth quarter as new stimulus measures are implemented but maintains a 2024 growth forecast of 4.9%.

China has infrequently missed its growth targets, with the last instance being in 2022 when the pandemic reduced growth to only 3%, significantly lower than the targeted 5.5%.

The government is set to release the third-quarter GDP data along with employment indicators on Oct. 18 at 0200 GMT.

The current poll reflects a generally pessimistic outlook compared to the previous forecast in July, which anticipated 5.0% growth for 2024. Out of 75 contributors surveyed in both July and October, 57% downgraded their forecasts for this year, while 32% kept their predictions unchanged.

Despite recent monetary measures, economists noted there was no change in the GDP forecasts, emphasizing a deep-seated pessimism regarding growth amid ongoing issues in the property sector.

Analysts and investors expect a meeting of China's parliament this month to announce a more detailed stimulus plan.

According to the poll, growth in the world's second-largest economy is projected to slow further to 4.5% in 2025, consistent with the earlier poll in July.

Recently, China's finance minister committed to a significant increase in debt levels to spur growth, but specifics of the stimulus package remain unspecified. It is reported that China might raise an additional 6 trillion yuan ($850 billion) from special treasury bonds over three years to support the economy through fiscal measures.

Reports indicate that China plans to issue about 2 trillion yuan in special sovereign bonds this year as part of the fiscal stimulus efforts.

In late September, the central bank implemented its most aggressive monetary support measures since the COVID-19 pandemic, which included interest rate cuts and a 1 trillion yuan liquidity infusion to bolster the property and stock markets.

Polled analysts predict that the central bank is likely to lower the one-year loan prime rate by 20 basis points and reduce banks' reserve requirement ratio (RRR) by 25 basis points in the fourth quarter. The PBOC may also cut the seven-day reverse repo rate by 20 basis points in the first quarter of 2025.

China's consumer inflation unexpectedly eased in September, while producer price deflation deepened, increasing the urgency for Beijing to stimulate demand as exports decline.

Analysts estimate a 0.5% rise in China's consumer prices this year, which is significantly below the 3% target set by the government, with a projection to increase to 1.4% in 2025.

(For additional stories from the Reuters global long-term economic outlook polls package:)

Polling by Susobhan Sarkar and Anant Chandak in Bengaluru and Jing Wang in Shanghai; reporting by Kevin Yao; editing by Shri Navaratnam