China’s latest efforts to boost growth have not yet had a widespread impact, as indicated by data and company earnings. This suggests that the world’s second-largest economy will not experience a rapid recovery in the near future.
While growth has improved in sectors such as real estate and manufacturing since Beijing initiated stimulus measures in late September, companies have remained cautious in their outlooks in recent weeks.
During an earnings call on Friday, food delivery giant Meituan mentioned that the impact of the stimulus was minimal, stating that the average hotel order value in its new travel booking business decreased less in October compared to previous months on a year-on-year basis.
Meituan’s CFO and senior vice president, Shaohui Chen, expressed confidence that the stimulus policies would gradually support the real economy and boost consumer spending, creating growth opportunities for the business.
Executives from e-commerce company Alibaba and social media operator Tencent echoed similar sentiments in their earnings calls last month, emphasizing that the effects of the stimulus would take time to translate into tangible growth.
The increase in stimulus measures aims to achieve this year’s official growth target of around 5% and maintain a similar pace next year while averting financial instability, according to Gabriel Wildau, managing director at Teneo. He highlighted that China’s focus remains on technological self-sufficiency and national security.
Preliminary economic indicators for November suggest an improvement in growth, though not a significant surge. The Caixin purchasing managers’ index for manufacturing showed continued expansion in factory activity, with the official PMI also indicating growth. Retail sales and industrial data for November are set to be released on December 16.
Despite these positive signs, Caixin’s measure of manufacturing labor revealed a contraction in employment for the third consecutive month in November. This indicates that the impact of economic stimulus has yet to be felt in the labor market, and businesses’ confidence in expanding their workforce needs to be reinforced.
As the U.S. imposed further restrictions on Chinese chipmakers and President-elect Donald Trump announced plans for tariffs on Chinese imports, the need for additional stimulus in China is expected to rise amid escalating geopolitical tensions.
A survey by U.S.-based advisory firm China Beige Book revealed that retail spending and home sales improved compared to a year ago, although there was weakness in consumption of services. The report also noted an increase in borrowing among respondents, signaling a rise in demand.
The Ministry of Finance in China has hinted at the possibility of more fiscal support next year, while investors await details from China’s annual economic planning meeting, typically held in mid-December.
