China’s gross domestic product expanded 5.2% for the entirety of last year, even as the economy probably lost some steam in the fourth quarter. Retail sales and industrial output are also seen growing in December from a year earlier against a low base of comparison — in late 2022, the country was dealing with a massive Covid-19 outbreak. The start of the year has brought mixed news.
Figures on Friday showed China’s consumer prices falling in December for a third month, their longest deflation streak since 2009. Exports, though, are showing signs of stabilization despite having dropped throughout 2023, a first since 2016. “The domestic demand recovery will be slow and bumpy as targeted stimulus measures trickle through to investment sectors and the property recovery proceeds at a snail-like pace," said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.
The People’s Bank of China will have an opportunity Monday to take action to counter deflationary pressures and boost lending. Economists surveyed by Bloomberg broadly expect the central bank to lower the rate on its one-year policy loans by 10 basis points to 2.4%. They also see policymakers pumping more cash into the financial system.
That likely won’t be enough to fix things, though economists are expecting the central bank to take other steps to boost growth, such as cutting the amount of cash banks must keep in reserve. Fiscal support is also on the cards, with the nation’s finance minister having signaled that government spending will rise. “We expect the PBOC to kick off the week with a rate cut on Monday.
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