A large advertisement touting China's “trade-in” policy hangs outside a housing project in Nanjing, China, on November 29, 2024.
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Data and corporate earnings show China's recent efforts to boost growth have not yet had a broad impact, suggesting the world's second-largest economy will not bounce back anytime soon.
Growth in sectors from real estate to manufacturing has improved since Beijing began announcing stimulus measures in late September. However, companies have maintained a cautious tone when releasing their forecasts in recent weeks.
When asked about the impact of the stimulus package on Friday, the food delivery giant responded Meituan simply stated that the average hotel order value in the newer travel booking business fell less sharply year-on-year in October than in previous months.
“However, it will take some time for the positive effect to fully take effect and last [expand] We are confident that these measures will gradually provide greater support to the real economy and stimulate consumer spending, bringing more growth opportunities for our company,” said Shaohui Chen, CFO and senior vice president of Meituan, according to a recording of the earnings call .
Executives of an e-commerce company Alibaba and social media operators Tencent Similar comments were made in their earnings releases last month, saying it would take time for economic stimulus to translate into growth.
The expansion of stimulus measures aims to meet this year's official target of about 5% and reach a similar pace next year – while preventing financial instability, Gabriel Wildau, Teneo's chief executive, said in a note on Monday. To him, the tone of the economy suggests that “technological self-sufficiency and national security remain top priorities” for China.
“Looking forward, our sources assume that the economic stimulus in 2025 will be gradual and data-dependent,” said Wildau. “'Just enough' rather than 'whatever it takes' will be the guiding principle.”
Preliminary economic indicators for November confirm the picture of improving but not explosive growth.
The Caixin manufacturing purchasing managers' index showed a further expansion in factory activity at 51.5, the highest since June, according to LSEG data. The official PMI was 50.3, the highest level since April. Retail sales and industrial data for November are due on December 16th.
Caixin's manufacturing labor force gauge showed employment fell for the third straight month in November. That suggests that “the impact of the stimulus on the labor market is yet to be felt and companies' confidence in expanding the workforce needs to be boosted,” Wang Zhe, senior economist at Caixin Insight Group, said in a report.
“While the economic downturn appears to have bottomed out, further consolidation is needed,” Wang said, pointing to the rising risk of “external uncertainties.”
The US on Monday imposed another round of restrictions aimed at squeezing Chinese chipmakers. President-elect Donald Trump last week announced plans to impose 10% tariffs on all U.S. imports of Chinese goods starting when he takes office in January.
“Markets will only be salivating for more economic stimulus as geopolitical temperatures rise,” said a survey of Chinese companies by US consultancy China Beige Book published on Monday.
The company surveyed 1,502 companies from Nov. 14 to 26 and found that retail spending improved from a year ago, as did home sales, despite “widespread” weakness in services consumption. The report also found that the share of respondents who took out more loans rose to its highest level since May 2022, indicating a pick-up in demand.
“Beijing’s stimulus measures have encouraged companies to pull back this month,” the report said. “But without the promise of additional support it is unlikely to last.”
China's Finance Ministry has said there could be further fiscal support next year. Investors are also paying attention to details of China's annual economic planning meeting, which usually takes place in mid-December.