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Why you should know: China has been on the minds of everyone for 2024. 2023 was disappointing in terms of economic activity. And 2023’s GDP will provide a preview of whether 2024 will be strong or disappointing for investors.

#1: 4Q 2023 GDP at 5.2%

4Q 2023 GDP was in line with expectations (5.3%) at 5.2%. So, this translates to a full-year 2023 growth of 5.2% compared to 3.0% in 2022. This was higher than the ‘around 5.0%’ targeted by the Chinese government. I take this as slightly positive news but I think this is disappointing. Early in the year 2023, estimates were as high as 5.8% for China considering that it was reopening from its strict zero-Covid policy. But a combination of a crash in the property market, consumer confidence and U.S.-China tensions threw everything out the window.

#2: Driven by recovery from Zero-Covid policy

Make no mistake. 2023 was still a year of recovery for both consumers and businesses. The services sector’s growth rose to 5.8% in 2023 from 2.3% in 2022. This was mainly driven by the accommodation and catering (Food & Beverage) sector growth of 14.5%. Investors did expect that a recovery in consumer sentiments would come but they were weaker-than-expected. Meanwhile, the industrial sector’s growth rose to 4.6% in 2023 from 3.6% in 2022.

#3: Consumer Confidence, Property Market = Main Concerns

It is not a secret that consumer confidence in China is not great. That has been the main reason why China’s expected economic rebound in 2023 was not as strong as expected. There are two main reasons for this. One, the overall labour market is ok (the unemployment rate is at 5.1%, similar to 2019 levels) but youth unemployment is at a record-high of about 20% (before China decided to not publish anymore). Two, most of the Chinese household wealth is in properties. And a crash in the property market wiped out most of it.

#4: No Big Growth in 2024

The official government target for 2024 is 4.5% to 5.5%. This is a stark departure from its previous targets of an explicit number. This means one thing, Chinese officials are unsure where the economy will go in 2024 and do not want to commit to a number. Meanwhile, both the IMF and World Bank are projecting lower growths of 4.6% and 4.5% respectively. I read this as no big growth story for China in 2024.

#5: More troubles on the horizon

There are more troubles on the horizon for China. Continued tensions with the U.S. and the appointment of an anti-China president in Taiwan mean that trade and diplomatic relations will be strained in 2024.