China’s growth efforts show cautious progress as businesses await more impact

China’s recent push to stimulate economic growth has shown modest progress, but the broader impact remains limited. Corporate earnings and data suggest that a robust recovery in the world’s second-largest economy may still be some way off.

Since September, Beijing has introduced a series of stimulus measures aimed at boosting key sectors like real estate and manufacturing. While there have been signs of improvement, many companies have maintained a cautious outlook. This sentiment was evident during Meituan’s earnings call last week when executives noted only a slight improvement in their hotel booking business.

“We are confident that these policies will gradually bolster the real economy and incentivize consumer spending, creating more opportunities for growth,” said Shaohui Chen, Meituan’s chief financial officer and senior vice president. However, he acknowledged that the positive effects would take time to become evident across broader consumption categories.

Other major players like Alibaba and Tencent echoed similar sentiments during their recent earnings discussions, emphasizing that while the stimulus measures are promising, their full impact will likely be gradual.

The Chinese government aims to hit this year’s growth target of approximately 5% and maintain a similar pace in 2025, all while managing financial risks. Gabriel Wildau, CEO of consultancy Teneo, highlighted that while economic growth is important, Beijing’s priorities remain firmly focused on technological self-sufficiency and national security.

“Stimulus in 2025 will likely be implemented cautiously and incrementally,” Wildau noted, stressing that the approach would prioritize “just enough” intervention over an aggressive, large-scale response.

Recent economic indicators paint a picture of modest recovery. The Caixin Purchasing Managers’ Index (PMI) for manufacturing hit 51.5 in November, signaling the strongest industrial activity since June, while the official PMI reached 50.3, the highest level since April. However, employment in the manufacturing sector continued to decline, marking the third consecutive month of contraction, according to Caixin Insight Group senior economist Wang Zhe.

“While the economic downturn appears to have bottomed out, the recovery needs further consolidation,” Wang said, adding that external uncertainties remain a significant risk.

Geopolitical tensions have also weighed on China’s recovery efforts. On Monday, the United States introduced additional restrictions targeting Chinese chipmakers, and President-elect Donald Trump has announced plans to impose new tariffs on Chinese goods when he assumes office in January. These developments underscore the challenges facing China’s economy as it seeks to navigate external pressures alongside internal reforms.

A survey by China Beige Book, conducted among 1,502 businesses in November, showed mixed results. Retail spending and home sales saw year-over-year improvements, but weakness persisted in the services sector. The survey also noted a significant rise in businesses applying for loans, the highest level since mid-2022, suggesting an increase in demand spurred by recent stimulus measures.

“Beijing’s efforts have encouraged businesses to step forward this month, but sustaining momentum will likely require additional support,” the China Beige Book report stated.

Looking ahead, China’s Finance Ministry has hinted at further fiscal measures in 2025. Investors are also anticipating outcomes from the country’s annual economic planning meeting, typically held in December, which could provide more clarity on Beijing’s strategy for the coming year.

While the current stimulus measures have shown some initial success, the path to sustained growth will depend on consistent and targeted support. Balancing short-term recovery goals with long-term stability remains a delicate task for China’s policymakers as they navigate a complex global and domestic economic landscape.

By Jhon W. Bauer

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