China faces unprecedented economic challenges

All eyes are on Beijing, where a major conference is taking place likely to redefine China's economic orientations until 2025. While the world's second largest economy finds itself faced with a lasting real estate crisis, weakened domestic consumption and renewed trade tensions with the United States, this annual meeting takes on capital importance. At a time when the global economic balance remains precarious, the resulting decisions will have repercussions well beyond China's borders.

The major economic challenges at the heart of the conference

The Central Conference on Economic Work, which opened this Wednesday, December 11, 2024, constitutes an essential meeting to define China's economic priorities for 2025. Under the supervision of Xi Jinping and Party officials Chinese Communist Party, this meeting focuses on several structural challenges that threaten the country's growth. Among the most pressing issues is the real estate crisis, where major companies like Evergrande continue to falter. This situation weakens the entire sector and fuels concerns about the financial stability of the world's second largest economy.

In this context, those responsible are seeking to halt the economic slowdown through the adoption of measures likely to restart the machine. Chinese exports, the traditional engine of growth, have slowed significantly in recent months. They went from an increase of 12.7% in October to only 6.7% in November. Faced with this observation, a new economic orientation was mentioned. The Politburo thus announced an “appropriate easing of monetary policy”, a measure which could result in a reduction in interest rates from 2025, a first in more than ten years. This choice reflects the urgency of acting to support a strained economy.

However, some observers are calling for caution regarding expectations related to this conference. “Few concrete measures should be announced, which could disappoint the markets,” warns Teeuwe Mevissen, economist at Rabobank. Although this meeting brings hope for an economic recovery, the real scope of the decisions could prove limited, in the absence of deep reforms or targeted action plans.

Towards a global strategy for a sustainable recovery

In parallel with monetary initiatives, the Chinese authorities are considering budgetary measures to stimulate flagging domestic consumption. Among the solutions considered are reducing taxes and strengthening social protection, tools likely to restore purchasing power to households and increase their spending. However, this strategy comes up against increased caution among consumers, who tend to favor services to the detriment of material goods. “Spending habits have changed, which requires adjustments to economic policy,” specifies Françoise Huang, economist at Allianz Trade. This structural evolution is forcing Beijing to rethink its economic policies in order to meet the new expectations of the population.

Long-lasting trade tensions with the United States further complicate this equation. Thus, the US administration continues to target Chinese companies with sanctions, which adds additional challenges to Beijing's economic strategy. Despite these obstacles, the Chinese government is maintaining its target of 5% growth for 2024, an ambition which reflects its desire to reassure investors and economic partners. Beyond borders, the conclusions of this conference will have repercussions on international trade relations. Furthermore, in Europe, sectors such as the automobile industry, which are highly dependent on the Chinese market, are carefully scrutinizing the announced directions.

Ultimately, the success of this economic recovery will depend on China's ability to reconcile its growth objectives with reforms adapted to the structural developments of its economy. The conference could thus redefine the country's economic priorities, but also its role in global trade.

This conference marks an essential step in defining China's economic strategy and its positioning on the international scene. If concrete and ambitious measures emerge, they could reassure investors and strengthen global partnerships. However, the challenges are numerous: reviving weakened domestic consumption, stabilizing the real estate sector, all in a tense international trade context. The strategic choices made today will have profound repercussions on the Chinese economy and its influence over the next decade. Only time will tell whether China will be able to turn this opportunity into lasting success.