The economic scars from China's real estate collapse are evident in the country's many street markets for construction materials. Owners of once-bustling shops selling everything from light fixtures to doors and toilets are heartbroken for their customers.
At the same time, China's exports soared. Companies ship cars, smartphones, and many other products to overseas markets that they can no longer sell domestically. Private companies are investing heavily in new factories and equipment to expand production for export.
China's economy grew 5% last year, the National Bureau of Statistics said on Friday, as a surge in exports and strong investment in factories and industrial equipment largely offset a prolonged construction slump.
The government set a target of “approximately 5%'' nearly a year ago. The 2024 figure was only slightly lower than China's 5.2% growth rate in 2023, when the country was recovering after nearly three years of lockdowns, mass quarantines and other harsh pandemic measures.
From October to December, the economy grew more strongly than in any other quarter of the year. Supported by strong car sales, China's economy expanded at a pace equivalent to 6.6% growth at the end of last year if extended to the full year.
Official figures are often met with skepticism, but government economists insist the economy has regained its footing. “China's economy is really recovering despite its ups and downs,” said Yang Ping, director of economic research at the National Development and Reform Commission, China's main economic planning agency.
Today, the real driver of the economy is our ever-expanding trade surplus, which reached nearly $1 trillion last year. The surplus in December was $104.8 billion, the largest ever reported by any country in a single month.
Last year, China built enough electric and plug-in hybrid vehicles to form a line across Asia and Europe from Beijing to Rome, Liu Daliang, director of statistics and analysis at the China General Administration of Customs, said at a press conference on Monday. He said that he exported. He did not mention that automakers are exporting more than twice as many gas-powered cars, but demand in China has halved since 2017 as consumers switch to electric cars.
Exports are booming, in part because China's vast population can no longer afford many of the goods produced by domestic factories. Dozens of real estate developers failed, jobs and wealth evaporated. Surviving developers have struggled to complete projects and are taking on little new apartment construction.
Homes, by far the primary asset for most households, plummeted in value, and the middle class lost much of its savings. As a result, consumer spending has slumped and is finally starting to bottom out. Corporate profits have continued to decline over the past three years.
The Chinese government has promoted several strategies in recent months to stabilize the economy. Civil servants are being given raises. Local governments are allowed to increase bond issuance to offset recent revenue losses from the sale of state-owned land to developers.
The central government has encouraged the construction of roads and other infrastructure projects to address the loss of construction jobs for real estate developers. But the Chinese government has struggled to find local governments with enough funds to fund these projects.
In an effort to reignite consumer spending, the Commerce Department is pushing a large-scale so-called cash-out program. National and local governments are working together to provide subsidies to households that replace old gas-guzzling cars with electric ones or replace old appliances with new, more energy-efficient models.
The program had a delayed start last spring. Initially, the subsidy amounted to just one-tenth of the purchase price of replacement cars and home appliances. However, sales increased significantly over the autumn after the government doubled the incentives in August.
China's car sales set a world record in November and broke that record in December, with 3.1 million cars sold. Battery electric vehicles and plug-in hybrid gasoline electric vehicles accounted for half of the market.
However, some national and state car purchase subsidies expired at the end of December, giving households a strong incentive to buy before then. Automaker executives are concerned that December sales could fall sharply, with many of their sales pushed forward from earlier this year.
Some academic economists have questioned whether the cash programs are diverting household spending toward new cars and appliances and away from food and other consumption. If consumers change the way they spend their money without increasing their overall spending, the economic impact will likely be modest.
Government economists claim the program is increasing overall spending. This month, the range of applicable home appliances has been expanded.
“These new policies can stimulate people's consumption demand. It's not just a change in direction,” Yang said at a press conference on Wednesday.
The government has been pressuring universities, banks and other institutions in mainland China and Hong Kong to ensure that economists do not question the accuracy of government statistics. Economists who engage in such behavior can have their social media accounts blocked, sometimes lose their jobs, and be barred from working in the financial sector.
Nevertheless, questions remain about the true health of the economy. Gao Xiangwen, chief economist at Chinese brokerage SDIC Securities, became the latest person to question the economy's actual growth rate during a panel discussion in Washington last month.
“My own guess is that the actual number over the past two to three years has averaged out to be around 2%,” he said, adding that for the next few years “the official numbers are always going to be that. I know that, and I think so too,” he added. Probably about 5%. ”
Since then, Mr. Gao has disappeared from public view. SDIC Securities did not respond to questions about Ko's remarks, and Ko was not available for comment. Gao's Hong Kong investment advisory qualification, which he had been practicing since 2012, expired at the end of December.
Hou Weitang is on the front lines of the economic slowdown. Mr. Hou is a wholesaler at a construction materials market in Jinan, eastern China's Shandong province. He has been working in the market for 20 years. There were almost no people there on a recent weekend.
Mr. Hou said that business conditions have continued to deteriorate. Like many entrepreneurs, he is currently focused on cost reduction rather than spending and investing.
“We have to cut costs, lower material prices, compete on price, and try to sell more,” Hou said. “All costs are being reduced. Only through this can we keep our doors open steadily, otherwise we would not be able to cover our expenses.”
Lee You contributed to the research.
