The country is facing challenges in the labor market, weak domestic demand and a severe crisis in the real estate sector
A Chinathe second largest economy in the world, experiences a situation of mistrust in the global market after announcing its goals for the Bruno domestic product (GDP) 2024. The Chinese government announced earlier this month that it aims to achieve economic growth of approx 5% this year – similar level to last year’s GDP.
For this year, however, the objective is seen by the economists and market analysts interviewed Earth equally bold, with which the country faces the challenges of the labor market high unemployment rate among young people, it remains weak domestic demand after the pandemic and continues to have a strong impact crisis in the real estate sector.
“There seems to be consensus that this lofty target may be more difficult to achieve this year,” commented Ebury economist and market analyst Eduardo Moutinho. “China can achieve 5% growth, but more stimulus will be needed. It is a challenging goal,” said André Senna Duarte, professor of economics at the Pontifical Catholic University of Rio de Janeiro (PUC-RJ).
On the real estate issue, Moutinho points out that investor confidence in the sector has been fragile since the Chinese government launched a crackdown on excessive debt by property developers in 2020, and subsequent problems faced by the Evergrande Group in 2021 and Country Garden in the past year.
Duarte, for his part, says there has been a glut of housing construction in recent years. This excess supply has led to a decline in the value of real estate, which constitutes the main asset class for Chinese families. According to him, “the crisis in the residential construction sector continues without signs of improvement”.
Is the Chinese economy slowing down?
Despite the scenario described above, economic research firm Capital Economics believes that China’s industrial production and retail sales data suggest that the country’s economy is not slowing down. On the contrary, it continues to improve, in a movement that is expected to continue in the coming months.
The consultancy stresses, however, that reaching the government’s target of “around 5%” economic growth in 2024 “still appears to be a challenge”.
Impact on Brazil
China’s impact on Brazil comes directly through the commodity channel. In the case of the housing crisis, Brazil is expected to see a decline in iron ore, which tends to suffer in a context of low levels of residential construction. However, exports continue to be the main driver of Brazil’s economic expansion.
In 2023, Brazil’s trade surplus reached a record $98 billion, or 4.5% of GDP, up from 3.2% the previous year. This trend led to a significant improvement in Brazil’s terms of trade, which exceeded long-term averages, mainly thanks to a robust 16.5% increase in exports to China.
Source: Terra
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