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What China's economic challenges could look like in 2024

November may have been an especially tough month for the Chinese economy, but what should global markets expect for the nation in 2024? Yahoo Finance's Rachelle Akuffo and Akiko Fujita outline China's biggest macroeconomic challenges, including its ongoing property developer crisis and slowing growth forecasts.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

RACHELLE AKUFFO: Well, China's economy may have seen a brief rebound earlier this year. But now, it's showing fresh signs of struggling, as it handles slowing GDP growth, high youth unemployment, and a growing property sector crunch.

The economic data has generally been soft over the past six months. Weakness in manufacturing principal among them. Factory activity slid even further into contraction in November, as foreign orders dried up. And China's real estate sector has been at the center of the storm, as concerns swirl over the stability of the nation's property developers.

AKIKO FUJITA: How much of the nation's wealth is tied up in property? House prices fell in 70 major cities in November. And sales were down 4%, lower than in October. And China isn't getting much help from businesses overseas in what has typically been a boost for them. New orders at home and abroad declining, as world economies struggle to fight inflation in their borders.

The data from the survey suggest that China's economy will likely slow in this final quarter for 2023. And next year could be met with even more challenging situations. Rachelle, the question that we keep asking is, how much of is this going to be stopped by government intervention? We're talking about incentives. So much of the discussion has been about what happened back in 2008, where when there was a global financial crisis, China stepped in with really, really fueling growth through large amounts of debt. You could argue that's where the property bubble really started to form.

And here we are today. So the question is, is China comfortable with a slower 5% growth, maybe sub 5%? Or will they do even more this time around to inject the economy with additional stimulus, given where things are?

RACHELLE AKUFFO: It's true. When you look at the number of factors involved, whether it's property, factory activity, services sector, as well, also weighing on consumer sentiment, you have to wonder at what point Beijing is going to step in and how much they're going to do to support it. Because we've been talking about this new era of Chinese growth. It's not going to be what we saw with the breakneck speed, always above 5% every year. This is a very different and maturing Chinese economy.

But definitely some warning signs to look for here. And China has a dual circulation strategy. They want to rely more on domestic consumption. But then you're also seeing foreign orders drying up, as well. So something of a balancing act. This is not the Chinese economy of old. But long term, a lot of people still bullish on the Chinese consumer. But this is an interesting phase considering how a lot of people were relying on China to be the economy that really led that post-COVID growth. So some nuance here for sure.

AKIKO FUJITA: And I guess there is an argument to be made also for those who've been watching China closely. That this was inevitable. Yes, there is the concern around the property market. That's still a significant concern. But China was not going to grow at double-digit growth for years. This is partly a maturing economy. And so we've seen that as well. But to your point, Xi Jinping, for years, looking at whether, in fact, he is comfortable with more quality growth, which is what he has talked about in the past this time around. So something we'll be watching.

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