- Chinese consumers will return from the Lunar New Year festive season next week.
- However, this does not mean that the economy will recover.
- Instead, spending is likely to slow, signaling more bad news for a government in Beijing that really needs a break.
China’s economy and market will be sluggish in 2024, but investor sentiment may deteriorate if the Spring Festival holiday continues.
This year marks the second Lunar New Year in China since the end of restrictions due to the coronavirus pandemic.
The entire country entered a public holiday through the weekend, increasing consumption and travel. Officials expect Chinese people to take a record 9 billion domestic passenger trips during the Christmas season.
Data on consumer spending for this season is not yet available, but Chinese authorities are already hoping for a boom, with China’s Ministry of Commerce labeling 2024 as the “Year of Promoting Consumption.”
However, analysts are not so optimistic.
Economic outlook for spring is bleak
Analysts at Nomura expect China’s economy to worsen into the spring as the Chinese government fails to revive its battered real estate sector.
Consumer spending on services is also likely to taper, they wrote in a note Tuesday.
“Growth in services consumption is likely to slow significantly after the Lunar New Year holiday as pent-up demand dissipates and consumer confidence declines,” the economists said.
Nomura economists added that continued geopolitical tensions during the US election season do not improve the situation in China.
These challenges pose a challenge to the world’s second-largest economy, which needs to plan a convincing recovery. China has been unable to maintain rapid growth more than a year after lifting its coronavirus lockdown, leading to a collapse in investor confidence.
Rich Lesser, global chairman of Boston Consulting Group, wrote in a note Tuesday that China needs to stop holding back growth.
“The contraction in the real estate sector and the weak stock market remain headwinds as they undermine the confidence and purchasing power of households, which need to spend to fuel growth,” Lesser wrote.
The market is not showing a positive attitude
Hong Kong’s stock market was the first to open after the holiday, but the situation was less clear on the back of an overnight drop in the US stock market after the US’ January inflation rate was higher than expected. It wasn’t good.
The Hang Seng China Enterprise Stock Index rose 1.1% as of 1:50 pm local time on Wednesday, after falling as much as 2%. The index has fallen 9% since the beginning of the year.
Hong Kong’s benchmark Hang Seng Index, which had previously fallen as much as 2%, was up 0.4% at one point. The index has fallen 8.5% since the beginning of the year.
The rally comes after trillions of dollars have been lost in mainland and Hong Kong markets since peaking in 2021.
The Chinese government is paying attention and is trying to set a lower limit on losses.
The authorities are I pulled out more than a dozen moves. The policy, which has been in place since January, is aimed at stabilizing the stock market crash amid the real estate crisis and supporting sluggish real estate market demand.
Even China’s leader Xi Jinping is poised to take personal note of the market downturn, stirring traders’ hopes for a strong market rescue plan. After all, there have been previous indications that authorities are considering it. stabilization fund To save the stock market from crashing.
On February 7, the Xi administration replaced the country’s top market regulator. But analysts are skeptical that the measures will solve fundamental problems in China’s economy and markets.
The mainland stock market is closed this week due to a public holiday.