China’s Stimulus Measures Fail to Ignite Economic Growth
China’s latest efforts to kickstart growth have not yet had a broad impact, according to data and company earnings. Despite improvements in certain industries such as real estate and manufacturing, companies have maintained a cautious tone when sharing their outlooks.
Stimulus measures, announced in late September, aimed to boost the economy to reach its official target of around 5% this year and a similar pace next year, while preventing financial instability. However, executives from major companies such as Meituan, Alibaba, and Tencent have said that stimulus will take time to translate into growth.
Preliminary economic indicators for November show a picture of improving, but not explosive, growth. The Caixin purchasing managers’ index for manufacturing showed further expansion in factory activity, while the official PMI came in at 50.3, its highest since April. Retail sales and industrial data for November are due to be released on December 16.
Despite these signs of improvement, employment in the manufacturing sector continued to contract for a third straight month in November, indicating that the effect of economic stimulus is yet to be felt in the labor market.
The Chinese government has vowed to provide further fiscal support next year, and investors are also waiting for details from China’s annual economic planning meeting, typically held in mid-December. However, markets are not expected to show significant signs of improvement without additional pledges of support.