Passengers Walk Along Platform as China’s Economy Awaits Christ of Fiscal Support
Passengers disembarked from trains at Chongqing North Railway Station on the first day of the 2025 Spring Festival travel rush, marking a busy period for China’s economy. However, the country’s economy has yet to show signs of a turnaround, despite government promises of support.
China’s economy has faced numerous challenges, including a drop in domestic demand and deflation, with consumer prices rising by just 0.5% in 2024, the slowest rise in at least 10 years.
The government has cut interest rates and announced stimulus plans, but details on fiscal support will likely only be revealed at the annual parliamentary meeting in March. Global investors are cautious, with BlackRock Investment Institute noting that “China’s fiscal stimulus is not yet enough to address the drags on economic growth.”
Consumer spending remains weak, with foreign investment declining, and some industries facing growth pressure, according to Beijing city mayor Yin Yong. The capital city targets 2% consumer price inflation for 2025, and aims to bolster tech development.
The commercial property market is expected to continue to put pressure on, with prices potentially accelerating their drop before recovering, according to JLL’s head of research, Mi Yang. Rents in Beijing for high-end offices fell 16% in 2024 and are expected to drop by nearly 15% this year, nearing 2008 or 2009 levels.
China has not handed out cash to consumers like the US did during the Covid-19 pandemic, instead opting for ultra-long bonds for trade-in subsidies and equipment upgrades. The program has seen 81 billion yuan in funding so far this year, covering home appliances, electric cars, and discounts on smartphones.
The trade-in program is expected to boost recycling transaction volumes by at least 10 percentage points, but its impact on consumer demand is uncertain. Nomura’s Chief China Economist Ting Lu expects the sales boost to fade by the second half of this year, limited by tepid new home sales.
China’s real estate sector, which once accounted for over 25% of the economy, is yet to recover from a 2020 crackdown on high-debt developers. Measures to prop up the sector include a whitelist process to finish construction on unsold apartments and using a direct support mechanism.
Despite the government’s efforts, the real estate market has not yet reached a bottom, with Fitch Ratings indicating authorities might provide more direct support. The Shanghai office for new homes has seen a surge in sales, but inventory levels in smaller cities are high, indicating further room for price drops.