context: Beijing's narrative towards the economy has shifted from combating negativity to pronouncing the bottom has already passed. After stronger GDP growth figures in Q2 and Q3 2023, alongside improvements in other measures like PMI (purchasing managers’ index), the centre wants to signal that the economy is back on track to increase confidence.
Policymakers are feeling confident about the economy’s future, argues Zhang Qingsong 张青松 PBoC Deputy Governor.
International investors are worried about the PRC’s economy, but the country’s growth prospects remain unchanged. Household disposable income grew by 5.9 percent y-o-y in Q3 2023, indicating that consumption’s role in driving growth was gaining speed.
With short-term performance not deviating from long-term plans, PBoC (People’s Bank of China ) will allow the market to drive adjustments, only getting involved if needed.
Like in other sectors, continuing 20 years of break-neck growth in real estate was not sustainable. Sooner or later, an adjustment would be needed. Still, the achievements of the high-growth era are significant. From 2000-23, the average living space per person grew from 22.8 to 42 square metres, in line with averages in mature economies.
Now the focus should be on preventing excessively rapid adjustments. Continued urbanisation and building renovations mean assured future demand for real estate. The centre’s ‘three great projects’ plan will help the transition by putting resources towards
- affordable housing
- urban village renovation
- dual use infrastructure for ordinary and emergency situations
Local government debt remains manageable and concentrated in wealthier central and eastern provinces. While some provinces may face fiscal pressure, their debts are backed by real assets and the centre has considered their situation in the comprehensive debt management plan.