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Strategists at TS Lombard said China’s economy would struggle for at least the next year.
The research firm estimates that China’s growth will remain below 5% until 2024.
This is because it will take time for monetary easing efforts to accelerate and the economy to recover.
According to TS Lombard strategists, China’s economy will not recover any time soon as the growth rate will remain low for the next year.
The research firm forecasts that the growth rate will remain below 5% until 2024 – compared to double-digit rates over the past 20 years. This implies that the country’s economy will slip into a “structural hard landing”, strategists said.
The sluggish growth is mainly due to the People’s Bank of China keeping monetary policy tight until the second half of 2022, as central bankers wrongly expected the economy to recover after zero post-COVID restrictions were withdrawn. High inflation will be seen.
But the opposite happened: China has seen a disappointing economic revival so far, with weak demand causing the country to slip into deflation this summer.
Meanwhile, turmoil in China’s real estate and stock market helped wipe out recent wealth gains that were initially thought to help economic growth after China reopened its economy.
“China’s release of pent-up demand was a one-time behavioral surge that fizzled out almost as quickly as it began,” strategists said in a note on Wednesday. “While the PBOC quickly realized its mistake and began easing again in Q1, the damage to liquidity conditions and growth had already been done.”
The note said that monetary easing efforts in the economy will take time to take effect, which means that China could face poor growth in the near term.
TS Lombard predicts that annual growth will hit its lowest level in the first quarter of 2024 and should start to pick up “moderately” around the middle of next year.
It added that the monthly data should stabilize at the end of the fourth quarter, although the economy will remain sluggish for most of 2024.
Other analysts warn of long-term problems for China’s economy, noting that the country is grappling with high debt levels and an aging population. Some economists say this could mean that China risks missing a decade, which will be a period of stagnation similar to that of Japan’s economy in the 90s.
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