China investors will be asking these 3 questions in 2024

CHONGQING, CHINA – JANUARY 02: People visit the 2nd International Light and Shadow Art Festival at the Fine Arts Park on January 2, 2024 in Chongqing, China. The 2nd International Light and Shadow Art Festival runs from December 29 to January 7. (Photo by VCG/VCG via Getty Images)

Vcg | Visual China Group | Getty Images

BEIJING — Despite pockets of strong growth, China’s investment story has been overshadowed in the last year by longer-term problems and tensions with the U.S.

Those uncertainties remain as 2024 kicks off. The country is also navigating new territory as it starts to settle into a lower growth range following the double-digit pace of past decades.

Here’s what investors are looking at for the year ahead:

Will there be stimulus?

For all the geopolitical risks, the attraction of China as a fast-growing market has waned as the economy matures.

Many were disappointed when China’s economy did not rebound as quickly as expected after the end of Covid-19 controls in December 2022. Other than in tourism and certain sectors such as electric cars, sluggish growth was the story for much of 2023, dragged down by real estate troubles and a slump in exports.

We remain positive on the overall China market, UBS strategist says

Several international investment banks changed their growth forecasts for China multiple times last year. After all the back and forth, the economy is widely expected to have grown by around 5%.

“Policy response is essential to solidify the recovery momentum,” Citi analysts said in a Jan. 3 report.

They expect that as early as January, the People’s Bank of China could reduce rates, such as the reserve requirement ratio — the amount of funds lenders need to hold as reserves. They also project that overall GDP could grow 4.6% this year.

Beijing has announced a slew of incrementally supportive policies. But it’s taken time to see a clear impact.

For the people who are already [invested] in China, and they kind of stuck with it for 2023, it’s this belief that the catalyst is coming.

Jason Hsu

CIO, Rayliant Global Advisors

“We believe property stabilization, a clear exit from deflation, better policy execution and communication would all be necessary for confidence recovery, with stimulus indispensable and good reforms welcome,” the Citi analysts said. “The risk is that markets may not be patient enough with reforms.”

In mid-December, top Chinese authorities held an annual meeting for discussing economic policy for the year ahead. An official readout did not indicate significant stimulus plans, but listed technological innovation as the first area of work.

Among major upcoming government meetings, Beijing is set to release detailed economic targets during a parliamentary gathering in early March.

“For the people who are already [invested] in China, and they kind of stuck with it for 2023, it’s this belief that the catalyst is coming,” Jason Hsu, chairman and chief investment officer of Rayliant Global Advisors, said in late November.

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