China economic outlook

Global Outlook: China’s economy

In EIU’s April 2024 Global Outlook video, principal economist, Robert Wood, and senior economist, Tianchen Xu, discuss the outlook for China’s economy.

In the recent opening of the annual legislative session, President Xi Jinping discussed unleashing “new productive forces”, a term coined by the president last September and has since become an umbrella term for productivity enhancements in China.

The ongoing US-China rivalry has meant China has become preoccupied with self-sufficiency in advanced technologies and supply chain security by doubling down on its industrial policy. China has made strides in sectors like EVs and shipbuilding but lags in the AI and chip sectors, widening its competitive gap with the US. As a result, Chinese leaders are growing anxious about potentially losing out and have listed productivity growth in sectors such as AI, hydrogen power and innovative medicine at the top of their agenda. 

As China moves forward with its new policy initiatives, security considerations over sensitive data will be at the forefront, meaning both Chinese officials and foreign enterprises will tread carefully when it comes to investment opportunities as compliance comes first. 

“EIU expects a set of incremental economic reforms will be rolled out over the next five years, rather than any radical changes. Firstly within public finance, as fiscal sustainability has become a matter of urgency, due to the unveiling of debt distress within local governments. Secondly, the country will consider economically beneficial schemes to tackle its challenge of an ageing population. Thirdly, we expect a wide range of incremental liberalisations to revive confidence and create business opportunities.”

Tianchen Xu, Senior economist, EIU

Another area for China’s policymakers to consider is the US elections being held later this year. While EIU’s core forecast is that Biden will win, if Trump is elected, it is likely he will revive tariff threats as his signature “art of the deal”. For example, by pressuring China for a new trade agreement. While this would create further operational challenges, the door is not completely closed for business and investors can seek to benefit from growing sectors in China such as healthcare and tourism. 

EIU forecasts conservative growth for China in 2024 at 4.7% as the base effect was high in 2023 due to strong post-recovery in household consumption and this will likely weaken this year. Additionally, the housing sector is experiencing a protracted correction as many large developers are close to insolvent and the government is not enforcing bold bailouts. The economy will rely heavily on public investment for growth this year. 

The analysis and forecasts featured in this video can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.