China’s 2024 Growth May Even Beat 2023, Ex-PBOC Adviser Says

(Bloomberg) -- China's economy could expand at a faster pace next year than in 2023 even as big questions remain about the eventual return of investor confidence, according to a former central bank adviser.

“My own sense is that the trend of growth potential at the moment is probably at around five or five-and-a-half” percent, Huang Yiping, a former member of the Monetary Policy Committee of the People's Bank of China, told Bloomberg TV on Thursday. “If things do well next year, I think the growth can continue at the current pace and probably go up a little bit.”

Achieving the official target of about 5% growth for this year shouldn't be “any problem at all,” he added.

Investors have been looking for evidence that China's recent stimulus measures are shoring up economic growth, which faces challenges from weak consumer and business confidence and an ongoing property crisis. The government last month announced more support for the economy, including issuing extra sovereign debt and raising the fiscal deficit ratio — a rare move.

There are signs the economy's recovery remains fragile: October delivered weaker-than-expected data on factory activity and an unexpected easing in the services sector. Even so, figures for the July-to-September period surpassed estimates and appeared to secure growth of about 5% for 2023, meaning the economy will likely hit the target Beijing announced in March.

Government-associated economists have projected Beijing can achieve a maximum potential growth rate of 5% to 5.5% between 2021 and 2025, without running the economy too hot. 

Slower growth during lockdown-hit 2022 and risks from the property sector have spurred other analysts to turn more cautious. Australia and New Zealand Banking Group Ltd. sees economic growth slowing to 4% in the next few years due to structural problems.

“The economy is on the way up, but it's a very gradual process so we shouldn't be surprised that some numbers don't show a significant strength,” said Huang, who is now the chair professor of finance and economics at Peking University. “One big question remains unanswered and will need to be seen is the confidence issue by investors and entrepreneurs. So we probably need to be a bit more patient.”

The nation faces other challenges to growth. At a usually twice-a-decade policy meeting this week, China vowed to clean up debt risks tied to local authorities with a “long-term mechanism,” and signaled a willingness to expand central government borrowing. Beijing is grappling with rising risks to the country's $61 trillion financial sector, which has been hit by failing property developers and troubled local governments.

“The main challenge we are facing is that local governments have lots of spending responsibilities, but they don't have enough revenue sources,” Huang said, in response to a question about which mechanisms might be used to resolve risk. 

“We need a proper division of revenues, and probably should consider decentralizing some revenues to the local government,” he said. He floated the prospect of taxing property and the digital economy to provide new sources of income.

Still, Huang stressed the importance for local governments to be responsible about borrowing. 

“If your fiscal position is not strong, you have to pay higher prices. That kind of mechanism was not there,” he said. “This is something we need to work on going forward.” 

--With assistance from Fran Wang, Tom Hancock, Haslinda Amin and Rishaad Salamat.

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