China's economy to gradually heat up in 2024, with manufacturing, spending as top growth drivers, not property: Fidelity
China's economy will show gradual improvement in 2024, propelled by manufacturing and consumption, rather than property and local government financing, amid a structural shift towards high-quality growth drivers, Peiqian Liu, Asia Economist at Fidelity International, said at a media briefing.
"Tourism, entertainment, culture, and other related spending are all signs of an emerging middle class upgrading its lifestyle, so [these segments] are perhaps going to be part of the drivers of growth," said Liu, adding that "in-touch" services consumption has also seen a meaningful rebound over the past year, on top of a recovery in traditional and consumer durables consumption.
She underlined the emergence of manufacturing as a pillar of the next phase of development and said that China is one of the world's biggest manufacturing hubs, with its value-add "contributing to close to 30% of the global outlook".
"Even though we have seen fixed-asset investments moderately slowing down, the underlying divergence tells us that real estate is obviously a drag to the real economy ...[and] the manufacturing sector has taken over the baton to become the main driver of growth."
That is where China's competitive advantage lies," Liu said.
Sector-wise, she said that as the world's second-largest economy tilts its policy support towards high-quality growth, China's auto industry will emerge as one of the key beneficiaries. "China's auto industry has been growing exponentially during the pandemic, even surpassing Japan as one of the world's top auto industry exporters over the past year," she said.
Green investments, the digital economy, technology and innovation are among other areas that are receiving strong government support and are emerging as new growth drivers, although their individual market sizes are still quite limited at this point.
Meanwhile, consumption will be another key engine driving growth, counterbalancing the drag caused by lacklustre external demand, she said.
"We might see some challenges from external demand because there are still rising risks of recession kicking in from developed markets, but that downside pressure might be partially offset by the recovery of domestic demand," she said.
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