17.01.25 - China’s economy - strong finish in 2024

China reported important economic data this morning. China’s economy achieved a 5% growth rate in 2024, marking a slowdown versus previous year’s 5.2% growth rate. This was inline with the official target set.In the fourth quarter, gross domestic product expanded 5.4%, higher than the estimated 5.0% by analysts. This growth was primarily driven by a 6.2% increase in manufacturing output (estimated 5.4%) while retail sales rose 3.7%, higher than the forecasted 3.5%.

Markets: Chinese stock markets showed only modest reaction. The Shanghai Composite Index experience slight gains while the Hang Seng Index rose 0.31%.

My View: The data set looks strong on first sight. The growth was bolstered by strong manufacturing and export activities. Government stimulus efforts kicked in. Economic data came in above estimates.
However, the question is, how investors look at the China, seeing the glass half empty or full.
Concerns persist regarding weak consumer sentiment, deflationary risks, and skepticism about the reliability of official data. Additionally, potential US tariff increases under US president Donald Trump could pose some more uncertainties for China's economic outlook.
I am in minority with my view, seeing the glass half full, sharing an optimistic perspective. China’s stock markets have the potential to rise and the downside is rather limited. With retail sales picking up, there is a potential for the consumer and internet stocks which show attractive valuations compared to global and US peers. I expect more stimulus to come, latest presented at the 14th National People's Congress (NPC) in beginning of March.
Bear in mind, the stock indices might show higher volatility during the coming weeks with all the politics. Any dip can be seen as an attractive entry point for a long-term allocation.

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