Wells Fargo Projects China’s Economy to Grow 4.6% in 2024, Falling Short of Government’s 5% Target

Wells Fargo has revised its forecast for China’s economic growth in 2024 down to 4.6%, a decrease from the previous estimate of 4.8% and falling short of the government’s official target of 5%.

The bank’s economists argue that recent policy measures from Chinese authorities do not adequately address the more profound structural issues facing the economy. They point out that China’s growth is hindered by a struggling property market, weak domestic demand, and ongoing deflationary pressures, with consumer confidence continuing to lag.

Chinese policymakers have implemented several strategies intended to bolster the property sector and stimulate economic growth, including lowering lending rates and reducing the reserve requirement ratio for major banks. However, Wells Fargo believes these initiatives are unlikely to significantly alter the economic landscape.

While acknowledging that easier monetary policy and support for the property sector are sensible approaches, economists convey that the latest announcements do not sufficiently tackle the fundamental growth challenges China is experiencing. They note that consumers are reluctant to invest in real estate at this time due to the significant downturn in the sector.

Moreover, China’s monetary policy presents additional challenges. Wells Fargo notes that the People’s Bank of China has been easing policies for some time, but these measures have not spurred economic activity. Current real interest rates remain positive and restrictive, which is expected to continue weighing down the economy in the near term.

On the fiscal policy front, Wells Fargo points out its minimal impact in recent years. Although China provided significant fiscal stimulus during past crises, such as the Global Financial Crisis, support has been notably lacking since the COVID-19 pandemic. The report indicates that authorities may be reluctant to increase fiscal stimulus due to the country’s substantial debt and concerns that households might prefer to save rather than spend any new aid, especially in the context of ongoing deflation.

Looking ahead, Wells Fargo projects that China’s economic growth will further decelerate, forecasting a modest growth rate of 4.3% for 2025.