“The goal of Chinese policymakers is to manage the economic transition; this suggests deleveraging has become the new priority over the old growth-centric approach.”
Since China embarked on economic reforms and opened up its markets in 1978, it has enjoyed a prolonged period of extraordinary growth. A discernible trend emerged in the early 2010s that the country’s growth has peaked and begun to moderate. The focus now turns to the endpoint for this trajectory, and the potential for China to maintain its ascent with a more sustainable growth rate.
This slowdown is structural in nature, propelled by a sharp correction in the housing sector since late 2021 that is still unfolding. In 2024, we expect housing prices in major cities to register faster declines, particularly as the supply of affordable homes increases. The painful process of rebalancing away from an excessive reliance on real estate, compounded by the onset of local government debt restructuring, is expected to place downward pressure on China’s growth over the next three to five years.
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