China: Real GDP Grew 5.2% in 2023

The Chinese government managed to exceed its 5.0% growth target for 2023. However, this was primarily driven by the 2.3% surge in real GDP in the first quarter. Growth subsequently slowed as the post-COVID rebound quickly lost steam and major structural issues hampered economic activity. The aftermath of China's draconian lockdowns and a bogged down real estate market continue to shake household and business confidence. The stimulus policies announced during the year didn't do much to resolve the situation as they focused more on infrastructure projects and investing to stimulate growth. However, these are short-term gains are made at the expense of long-term improvement. That said, youth unemployment—which peaked at 21.3% in June—is improving and fell to 14.9% in December.

China is also grappling with deflation and experienced a third consecutive month of annual price declines in December. Even more problematic is the price of pork—a key indicator of Chinese demand—which has fallen 26.1% since December 2022. Despite the growth in retail sales and industrial production, the figures are masking some areas of weakness. During the same period of 2022, major protests took place demanding that the government lift the strict lockdowns associated with its zero-COVID policy.  

Although the economic outlook isn't very promising, China remains an emerging country and growth is likely to remain stronger than in advanced economies. That said, the slowdown is expected to continue, especially given China's shrinking population, and we expect real GDP to grow 4.4% in 2024. The government may ramp up its stimulus efforts but, without any measures to diversify the economy, China may continue to disappoint.