In 2023, China emerged from the shadows of the measures used to control the pandemic, but its economy and stock market lagged, continuously impacted by the shift in supply chains, technological blockades, and the domestic real estate market's turmoil. MacroMicro has meticulously analyzed the major dilemmas facing China today and the strategies for breaking through these challenges, also forecasting the trajectory of the Chinese market in 2024.
In 2023, China's emergence from stringent pandemic policies did not lead to the robust recovery the market was anticipating. Despite a low base, real GDP growth in Q1-Q3 was modest at 4.5%, 6.3%, and 4.9% respectively, trailing the average growth rate of 6.65% from 2015-2019. The core economic driver, "fixed asset investment," continued its downward trend in annual growth in recent quarters. Rising unemployment and a contraction in the real estate market have led to a slow recovery in consumer sentiment, stunting inflation pressures. Additionally, geopolitical risks stemming from the external technology war rendered mainland and Hong Kong stocks among the worst performers globally this year. As illustrated in the chart below, as of November 22, the Shanghai and Shenzhen 300 Index and the Hang Seng Index have lagged other major stock indices significantly.
Looking ahead to 2024, China remains a focal point for global investors and manufacturers. Following the escalation of the U.S. semiconductor chip ban in October, major tech firms including Nvidia have persisted in designing lower end chips for the Chinese market. The U.S.-China summit in November also captured the attention of capital markets and business leaders, underlining the undeniable scale of China's consumer market (the world's largest in semiconductors, mobile phones, and automobiles). Additionally, the latest data shows that nearly 31% of the global manufacturing value-added comes from China, far exceeding the United States (15.6%), the European Union (15.9%), and Japan (6.4%). China's exports also account for 14.9% of the global market share, with the United States (7.8%) and Japan (3.4%) trailing behind. These statistics highlight the significant role of Chinese manufacturers in the global supply chain.
In the third article of our outlook series, we will focus on China's two major economic challenges in 2024, exploring how China's red supply chain can break through amid the structural issues we have repeatedly highlighted. Will Chinese stocks and the yuan be able to reverse 2023's downturn next year?
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