Siah Hwee Ang looks at what will happen in the giant Chinese economy in 2024, with a special focus on how that could affect New Zealand

By Siah Hwee Ang*

Having been a main driver of world economic growth in recent times, the prospects of China in 2024 would be on the front of mind of many across the globe.

Here I provide highlights of 5 key observations that we should expect from China in 2024. They are not in any particular order of importance, and by no means an exhaustive list.

1. China will remain as the world’s largest trading nation.

Since 2013, China has been the world’s largest product trading nation. It also became the world’s largest trading (including both product and service) nation in 2020. A major lesson from the last few years has been the need for economies to be as self-sufficiency on key resources. Yet, any shift in production and trade will take time. China’s strengths in product exports will continue to break new grounds in 2024, ensuring the economy’s status as the world’s largest trading nation.

2. China’s economy will continue to slow down.

This has been a major talking point and the expectation of China’s GDP to continue to grow at 5% or more is just unrealistic. In the last couple of years, the government has also conceded that its growth needs adjustments downwards. This is an economy that has been economically growing at the size of Russia in 2018, Ireland in 2019, Norway in 2020, UK in 2021, and Morocco in 2022. In 2022, its growth was only 3%. China will (need to) activate more actors in managing its next stage of growth. The relatively high local government debts will mean intervention from central government, deeming it necessary to generate more income. With stagnant and potentially declining work force in the coming years, relying on state-owned and state-linked enterprises won’t be adequate. We should see the private sector feature more in its planning as well. Further, investment in agriculture is pivotal for self-sufficiency in light of limited arable land. Not to say the least the importance to maintain balanced growth across regions within China. For stability in growth, we should expect China to pace itself in 2024, and its GDP to grow between 4-5%. Just to contextualise, a growth of 4% would be equivalent to the size of the Poland economy while 5% is that of Turkey’s.

3. China will continue to grapple with a consumption-led growth model.

Chinese are good at savings. In 2023 alone, new bank deposits exceed new loans by about NZ$10 trillion. Given such pattern of behaviour, it will require a major effort from the Chinese government to try to get its citizens to spend their share of the US$40 trillion of bank deposits to fuel internal consumption growth. Rising living costs will lend a hand on this. But the consumption-led model will take shape very slowly.

4. China will continue to push for more trade with developing countries.

In its export growth, the percentage of China’s exports to developing countries has been rising and has in fact recently overtaken exports to US, EU and Japan combined. We should expect this trade pattern to continue as it engages further in developments globally. This should not be taken as China distancing itself from the West or the developed, rather it is more due to the relative untapped opportunities that the developing world brings. This will be consistent with its Belt and Road Initiative and Global Development Initiative. We should also see more actions on the BRICS front, a bloc initiated by Brazil, Russia, India and China in 2009, joined by South Africa in 2010, and now Egypt, Ethiopia, Iran, Saudi Arabia and United Arab Emirates in 2024.

5. China will maintain a central role in many value and supply chains.

The topic of diversifying away from China has received a lot of discussion globally. There have been attempts by companies to do that and by other economies to seek to be an alternative to China in some areas. Without specific mention of companies or countries, it has been clear the success rate of shunning away from China has been low. Such efforts can only be possible if a company moving away is willing to take a bullet to lose efficiency and income in the short run, and for the new location to have the infrastructure to pick it up in the short to medium term. This equation is too complex and global competition is stiff enough to deter such a patient approach. While China is a known world factory, it has capabilities that were built over time and is across many parts of the value chain in most manufactured goods, if not services. It is also a key player in commodities and/or the processing of these. While we expect the diversification conversation to continue in 2024, there is unlikely to be a lot of traction in practice.

*Siah Hwee Ang is Professor in International Business and Strategy, Professorial Chair in Business in Asia, and Director of Southeast Asia Centre of Asia-Pacific Excellence at Victoria University of Wellington.