The Chinese economy has a long way to go, during which it is necessary to overcome steep hill.

This opinion on the prospects of the mentioned country’s economic system is of Frederic Neumann, Chief Economist for Asia at HSBC. Expert says that in this case, a high level of probability of a difficult path is unlikely to be able to change by fiscal stimulus.

This forecast, which is not an example of an optimistic vision of the future, cannot cancel out the improvement in Chinese exports, which grew by 0.5% year-on-year in November. The result for last month turned out to be significantly better than the forecast of analysts, who expected a 1.1% drop in shipments from China. At the same time, imports in this country decreased by 0.6% year-on-year in November.

Experts say that at present, the level of global demand for products manufactured by Chinese companies is not at those marks that are a sufficient argument for assertions about the confident prospects for economic growth of this exporting state. Analysts also note that Beijing’s political support, which in the context of stimulating an intensive positive dynamic of the economic system is focused on the supply side, is not a tool that will be able to restore domestic consumer activity without significant difficulties to compensate for the unfavorable state of affairs in the external direction.

Frederic Neumann, during a conversation with media representatives, said that the Chinese economy remains weak. He also stated that the fact of an increase in the volume of export activities of this country should be treated with distrust. According to him, there are several better export indicators in Asia. In this context, the expert mentioned Taiwan and South Korea. He noted that the dynamic of the external supply indicator is currently affected by a large inventory adjustment going through the global system.

Frederic Neumann believes that Chinese exports will not maintain a positive momentum in the foreseeable future. He also does not expect an improvement in the situation in the domestic market of this country, mentioning in this case the deterioration of import indicators. According to him, current circumstances confirm that the Chinese economy is facing a steep hill, without overcoming which there is no reason to reflect on the prospects for growth.

Mr. Neumann says that the aforementioned inventory adjustment, especially among American importers, combined with the underlying base effects means that an unexpected improvement in China’s exports does not necessarily signal an acceleration in related shipments. The expert notes that all forecasts, including expectations regarding orders for electronics, assume no growth in demand. In this context, he stated that there is a high probability of a slowdown in the United States economy next year. Separately, the expert noted that demand in the EU continues to demonstrate a lack of sustainability. He stated that against the background of these realities, there is no basis for a strong export cycle.

Frederic Neumann says that Beijing should focus on domestic demand as a factor in stimulating economic growth. At the same time, he noted that so far there is no evidence that the Chinese authorities intend to act within the framework of such a strategy.

Beijing has used fiscal stimulus to support the weak recovery of the economic system after the coronavirus pandemic. Also, as part of this decision, the authorities sought to contain the debt crisis among Chinese developers, which is a difficult situation that tends to worsen. The International Monetary Fund predicts that China’s GDP growth will be fixed at 5.4% current year and expects this figure to decrease to 4.6% in 2024.

Frederic Neumann says that there is no doubt that Beijing still has powerful levers of influence on the dynamic of processes in the economic space, despite the significant debt pressure. He also stated that economic growth indicators are not so catastrophic as to justify fiscal actions that are likely to increase the debt burden.

Mr. Neumann says that the negative situation on the labor market and the lack of intensive implementation of infrastructure projects still did not provoke such a recession, which requires radical incentive measures. According to him, the economic growth indicators in China do not provide for the urgency of rolling out large-scale government support packages. He assumes that the situation will not change in the coming months, continuing to remain in the current configuration.