Chinese culture and traditions make up a special relevance for its population. An example of this is the Moon Festival or the Chinese New Year that begins accompanied by an animal that represents it in the Chinese Zodiac. 2025 is the shift of the wooden snake, symbol of wisdom, prudence and strategy, which could assume, for many, a year of moderate economic recovery thanks to fiscal stimuli and adjustments in Beijing policies. Thus, what can we expect from the future of its economy and what challenges the Asian giant will have to face in the most immediate future?
If we start analyzing China’s economic scenario this 2024, without a doubt the country has had to overcome significant obstacles, including a real estate market near the crisis and a climate full of uncertainty given the possible tariff policies. Along these lines, the regulations implemented from the Government have generated, over the last years, a certain discontent between its population and mainly by private investors. Those regulations that began to see the light in 2023 have turned out to be not entirely positive for their economy and for some sectors particularly, such as real estate whose growth has been stagnant. In fact, with the aim of avoiding an economic crisis, many of them expect to be reversed gradually throughout this 2025.
Despite this complex situation, It is undeniable that the Asian giant has all ballots to achieve robust growth and its potential is clear. While it is true that, as we have already noticed the previous year, excessive savings by households attached to the spending cuts could cause the deflation of production and consumption prices, a trend that would be defining its economy for another year. Much of the savings obtained in the past have been allocated to investments and capacities consolidation, which has caused An imbalance between supply and demand increasingly difficult to compensate. Consequently, given the continuous disappointments that the Chinese people have suffered in front of a government that puts firm and contrary to growth policies, recovering confidence will be vital for 2025.
In parallel, the negative relationship between bonds and actions recorded during the last quarter of 2024 that would yield various hypotheses. Volatility levels alarmed on a possible “Bond bubble” causing the Popular Bank of China (PBOC) to have to act to increase the availability of liquidity in the country. The fluctuations experienced in the stock market affected the confidence of private investors in this situation. However, China’s low inflation for 2024 (0.1% in 2024 and 3.1% accumulated since 2020, compared to 2.5% and 22% in the US) allowed the performance of the bonds to be higher to the expected. Since 2022 the bonds in RMB have revalued 22% accumulated (total performance). A change in economic policies could allow the prices of the actions to rise and the yields of the bonds were higher, thus allowing Chinese actions to stabilize.
On the other hand, the second largest economy in the world also faces international tensions starring the North American country. Although it is unknown how Trump could implement its commercial policy, it is expected that perhaps that import tariffs on Chinese products will increase significantly. An already planned event, however, from China. Thus, as a corrective strategy to deal with a tariff shock similar to that of 2018, exports have been diverted through third countries such as Mexico and Vietnam, making them export countries nominal to the US.
Anyway, although China’s export market share To the North American country has descended to third position, the total exports of Beijing are still extremely strong, reaching about 3.5 billion dollars in 2024compared to an average of 3.1 billion dollars in the previous five years and 2.3 billion dollars in the five years prior to 2019. Thus, the Commercial surplus Total of China amounted to some 969,000 million dollars in 2024compared to 421,000 million the prepazed data recorded in 2019, according to Bloomberg.
Therefore and despite the uncertainty that surrounds this scenario, China has a very solid manufacturing sectorwhich can be supported by stimulus policies to undermine the possible risks that may arise in export.
Focusing on an improvement approach and sake of avoiding a severe crisis, Beijing will probably continue to draw a wide arch of political change that began in 2023– in the one that placed economic development as the main political objective – and that will continue in 2025. In the year of the wooden snake, we maintain our optimistic expectations and believe that the logical result in 2025 will include A stronger economy accompanied by forceful measures. The Chinese economy could be playing background.
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