Wells Fargo sees China’s economy growing 4.6% in 2024, below government target of 5% Via Investing.com

Investing.com — Wells Fargo now expects China’s economy to grow 4.6% in 2024, down from a previous estimate of 4.8% and below the government’s official 5% target.

The bank’s economists believe that despite recent support from the Chinese authorities, these measures are not enough to address the deeper structural challenges facing the economy. They point out that China’s growth remains hampered by a subdued housing market, weak domestic consumption and deflationary pressures, with consumer confidence remaining low.

Chinese policymakers have introduced several measures to support the real estate sector and boost growth, including lower lending rates and lower reserve requirements for major banks. However, according to Wells Fargo, these policies are unlikely to significantly change the economic trajectory.

“Directionally, easier monetary policy and supporting the real estate sector is an appropriate course of action; however, we believe the recent announcements are not a panacea for China’s growth challenges,” the economists said in a note.

“In terms of support for the real estate sector, we believe that Chinese consumers are unwilling to direct capital to real estate at the current time, given the sharp and ongoing downturn in the industry,” they added.

China’s monetary policy further complicates the economic outlook. Wells Fargo points out that the People’s Bank of China (PBOC) has been easing for some time, but these actions have failed to spark economic activity.

Specifically, China’s real interest rates remain positive and tight. Economists said “the gradual tightening of monetary policy, which maintains tight monetary policy settings, will continue to act as a drag on China’s economy for now.”

On fiscal policy, Wells Fargo notes the limited role it has played in recent years. While China has implemented substantial fiscal stimulus in previous crises, such as during the global financial crisis, fiscal support has been relatively absent in the post-COVID era.

The report suggests that Chinese authorities may be hesitant to increase fiscal stimulus due to the country’s high debt burden and fears that households would opt to save rather than spend any stimulus, especially in the current deflationary environment.

Looking ahead, Wells Fargo expects China’s economic growth to slow further in 2025, forecasting a modest 4.3% growth rate.