What happened Will China end 2024 on a much-needed economic high note? According to McKinsey’s latest China Brief, the current picture in China mixes financial resilience with persistent challenges. Consumption momentum and ongoing uncertainty cast a long shadow over the future, according to Daniel Zipser, a Senior Partner and the leader of the consultancy’s Asia Consumer and Retail Practice. The fall has been shaped by Beijing’s stimulus measures and consumer spending, the report says. Since September 24, a series of economic stimulus measures has been enacted, aiming to stabilize a shaky post-pandemic recovery. One of the most telling outcomes of these measures was the better-than-expected results of the annual Double 11 (Singles’ Day) Shopping Festival. The event has emerged as a major commercial phenomenon and a barometer of consumer confidence and retail health. This year, the retail extravaganza exceeded industry expectations, pointing towards renewed, albeit cautious, optimism. However, enthusiasm remains tempered. The surge in consumption could still bump up against broader economic headwinds. Despite an increase in activity, economists are wary that the scope and scale of these stimulus measures may not be sufficient to counterbalance deep-seated issues, such as low business confidence and persistent weaknesses in the real estate sector, a critical pillar of China’s economic model. Another indicator of improving economic health is the recovery seen in Chinese stock markets. Since the introduction of stimulus measures in September, the CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, has risen by some 20%. While this bounce-back reflects a measure of renewed optimism among investors, the shadow of volatility still looms large. Many investors are uncertain whether the market recovery has legs. On the property front, positive growth was observed in October and earlier this month, with residential property transactions in 30 major cities ticking up 2% YoY, the sector’s first upward movement this year. While expansion is modest, its significance lies in the reversal of negative growth, hinting that targeted property policies may be beginning to stabilize a beleaguered sector. Retail sales have also shown signs of life, with year-over-year growth reaching 5% in October, compared to 3% in earlier months. This improvement coincides with the early start of this year’s Double 11 shopping season, boosting categories such as cosmetics and home appliances. E-commerce remains a potent force in driving consumption, underscoring the growing appetite for digital platforms among Chinese consumers. Notably, electric vehicles (EVs) remain a bright spot, with sales up more than 50% in October compared to the previous year, contributing significantly to overall car sales growth. The Jing Take Despite these promising indicators, gains are uneven across sectors. While cosmetics, home appliances, and EVs led the charge, other categories, such as clothing and food services, exhibited more modest recoveries. This unevenness suggests that while some segments of the economy are accelerating, others are still struggling to regain their footing, reflecting the dual-track nature of the recovery. The travel industry has seen an extended rebound over the course of the year. During the National Holiday in early October, domestic travel increased by 5.9% compared to 2023, and travel spending rose by 6.3% YoY. More importantly, both of these metrics surpassed 2019’s pre-pandemic level, signaling that Chinese consumers are returning to more typical spending behavior when it comes to travel and leisure. Outbound international travel is likewise rebounding, albeit more slowly. The recovery rate for outbound air passengers from mainland China has climbed through the year, approaching pre-Covid levels. The return of international travel boosts the service sector while reflecting growing confidence among Chinese consumers about economic stability and personal financial security. Despite this apparent momentum, uncertainties linger over China’s economic prospects. Core challenges — particularly low consumer and business confidence — continue to put a damper on activity. Economists remain skeptical about the lasting effects of government measures to prop up consumption, with concerns that the rebound may be short-lived without deeper structural reforms. Specifically, questions remain about whether the real estate market can truly rebound, given its size and interconnectedness with other sectors. The positive signs — rising stock indices, increased property sales, and a booming travel sector — must be weighed against underlying fragility. The current rebound seems to be propelled more by stimulus and sentiment rather than fundamental economic shifts. As Zipser notes, the outcome of recent economic policies may not be fully evident until the first quarter of 2025, when the impact of liquidity injections and holiday spending can be more comprehensively assessed.
