China economy’s strong start to 2024 deals blow to “over-pessimism” but recovery hangs on property market

Citi concludes Beijing is ultimately responsible for the future direction of the Chinese economy this year and beyond. Further policy efforts are “much necessary to solidify the recovery”, they note.
Citi believes markets are going to focus on how policy is implemented in the wake of the recent National People’s Congress (NPC). The NPC, which concluded earlier this month, saw Beijing commit to a GDP target of 5% for 2024. This is considered ambitious by the analyst community which is predicting just 4.6% growth.
According to Citi, in order for these two points to converge, analysts will be assessing three major items going forward for the Chinese economy:

1. The pace of fiscal policy deployment:
- Particularly with respect to infrastructure spending
- But high levels of local government debt could stymie efforts here

2. Details of equipment upgrade and trade-in programs for durable goods:
- Market is waiting on details of implementation, funding source, and scale

3. Monetary policies:
- “Additional monetary policies are necessary” notes Citi
- Expecting the first 0.10% cut to the 1-year medium-term lending facility (MLF) to occur in the second quarter of the year