China's recent push to spur economic growth has shown modest progress, but the broader impact remains limited. Earnings and corporate data suggest that a robust recovery in the world's second-largest economy may still be a long way off.
Since September, Beijing has introduced a series of stimulus measures aimed at boosting key sectors such as real estate and manufacturing. While there have been signs of improvement, many companies have maintained a cautious outlook. This sentiment was evident during Meituan's earnings call last week, when executives noted only a slight improvement in their hotel booking business.
“We are confident that these policies will gradually strengthen the real economy and incentivize consumer spending, creating more growth opportunities,” said Shaohui Chen, chief financial officer and senior vice president of Meituan. However, he acknowledged that positive effects will take time to become evident across broader consumer categories.
Other major players like Alibaba and Tencent echoed similar sentiments during their recent earnings calls, noting that while the stimulus measures are promising, their full impact will likely be gradual.
The Chinese government aims to meet its growth target of around 5% this year and maintain a similar pace in 2025, all while managing financial risks. Gabriel Wildau, chief executive of consultancy Teneo, stressed that while economic growth is important, Beijing's priorities remain firmly focused on technological self-sufficiency and national security.
“Stimuli in 2025 will likely be implemented cautiously and incrementally,” Wildau noted, stressing that the approach would prioritize “just enough” intervention over a large-scale aggressive response.
Recent economic indicators paint a picture of modest recovery. The Caixin Purchasing Managers' Index (PMI) for the manufacturing sector hit 51.5 in November, signaling the strongest industrial activity since June, while the official PMI reached 50.3, its highest level since April. However, employment in the manufacturing sector continued to decline, marking the third consecutive month of contraction, according to Wang Zhe, senior economist at Caixin Insight Group.
“Although the economic crisis appears to have bottomed out, the recovery needs further consolidation,” Wang said, adding that external uncertainties remain a significant risk.
Geopolitical tensions have also weighed on China's recovery efforts. The United States introduced further restrictions on Chinese chipmakers on Monday, and President-elect Donald Trump announced plans to impose new tariffs on Chinese goods when he takes office in January. These developments underline the challenges facing the Chinese economy as it tries to manage external pressures alongside domestic reforms.
A survey of 1,502 companies by China Beige Book in November showed mixed results. Retail spending and home sales saw year-over-year improvements, but weakness in the services sector persisted. The survey also found a significant increase in loan requests from businesses, the highest level since mid-2022, suggesting an increase in demand spurred by recent stimulus measures.
“Beijing's efforts have encouraged businesses to make strides this month, but sustaining the momentum will likely require further support,” the China Beige Book report said.
Looking ahead, China's Ministry of Finance has hinted at further fiscal measures in 2025. Investors are also anticipating the results of the country's annual economic planning meeting, usually held in December, which could provide greater clarity on the fiscal strategy Beijing for next year.
While current stimulus measures have shown some initial success, the path to sustained growth will depend on consistent and targeted support. Balancing short-term recovery goals with long-term stability remains a delicate task for Chinese policymakers as they navigate a complex global and domestic economic landscape.
