The recent report released by Tianfeng Securities offers an optimistic outlook for China's economy as it heads into the end of 2024. Various factors, including policy interventions and a surge in exports, are projected to help the economy finish the year on a strong noteDespite the positive long-term trends, there are immediate concerns regarding potential temporary impacts on economic data from January to February, including a possible decline in industrial production growth due to fewer working days during this period.

According to experts, the overall economic trajectory for 2024 begins with a downward trend before rebounding, largely thanks to strategic policy measuresThe GDP is anticipated to grow at a year-on-year rate of 5.4% in the fourth quarter, contributing to an annual growth of approximately 5%. This anticipated recovery is supported by recent industrial value-added data showing positive growth trends across different sectors.

Breaking down the GDP by months in the last quarter, estimates suggest that it will show growth rates of 5.2% for October and November, ramping up to 5.6% in December

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This upward trend in December plays a crucial role in boosting the quarterly growth statisticsAdditionally, the service sector is showing signs of recovery, with the production index climbing by 0.4 percentage points to reach 6.5% in DecemberMeanwhile, the increase in industrial value-added also reflects a 0.8 percentage point gain, resulting in growth of about 5.8% for the secondary sector, underscoring its vital role in the overall GDP rebound.

Several short-term drivers have played a role in this scenario, with the Chinese New Year being a significant factorWith the upcoming holiday season, many businesses are accelerating production rates to meet demand, providing a temporary boost to December's outputHowever, the working days are set to drop from 40 in early 2024 to only 38 in January and February 2025, which may cause pressure on industrial growth rates during these months.

Export activity has also shown significant strength, with a 10.7% year-on-year increase in December

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This is particularly notable as the value of exported goods has risen faster than the industrial output growth rate, which underscores the importance of trade in the current climateMoreover, with recent shifts in tariff regulations not fully in effect, exports are expected to lend continued support to production levels.

Key sectors benefiting from the new policies are primarily in equipment manufacturing and the automotive industryData from December revealed an impressive growth of 3.3 percentage points in general equipment manufacturing and a remarkable 5.7 percentage point increase in automotive manufacturing, showing the effectiveness of targeted governmental support in these high-impact sectors.

As we round out the fiscal year, the trend of rising service consumption continues to shape economic landscapes, alongside consistent export performance, a gradual shift away from real estate dependency, and ongoing optimization within critical manufacturing sectors.

Looking at consumer behaviour, the contribution of final consumption to GDP remains a primary stabilizing force

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Estimates indicate that consumer spending forms approximately 55.2% of GDP for 2024, slightly declining from 2023 but still near pre-pandemic levelsReal estate investments remain a detractor, as they see a continued decline, shifting from 43.3% of GDP in 2021 down to about 41.4% in 2024. In contrast, robust export conditions are boosting the net export contribution to GDP, reaching a new high of 3.5%.

Analysis of export categories for January to November 2024 highlights a continuing trend of structural evolution within China's trade dynamicsCapital goods constitute 46.1% of exports, intermediate goods make up 25.3%, and consumer goods account for 28.6%. This indicates a slight rise in capital goods and a decline in the consumer goods sector's share compared to the previous year.

In terms of consumer patterns, the report outlines a clear dichotomy: strong service consumption juxtaposed with weaker goods consumption

Expected growth rates of personal income and consumption demonstrate healthy increases of 5.3% across the board, though the retail sales growth in commodity consumption is more subdued at 3.5%. However, services like hospitality and travel are beginning to flourish post-COVID, expected to outpace commodity consumption markedly.

The challenge remains that the latter half of 2024, particularly concerning goods consumption, will be contingent upon policies aimed at stimulating demand recovery, especially in technology and household goodsSpecific categories have shown significant retail growth, necessitating increased government focus on enhancing consumers' willingness to spend amid relatively high baseline pressures from previous years.

Investment patterns reveal a clear trend towards de-emphasizing the real estate market as the primary growth driverIn 2024, real estate investment is projected to decline by 10.6%, making it the third consecutive year of significant downturns

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This drop has led to real estate investments shrinking from 27.1% of the entire fixed asset investment landscape in 2021 to 19.5% in 2024. Consequently, the lessened impact of real estate depreciation on fixed asset investment is gradually diminishing.

Thanks to governmental policy expansion in areas such as equipment upgrades, manufacturing investments have remained robust, expected to grow by 9.2% in 2024. This shift has resulted in manufacturing investments claiming a larger share than both infrastructure and real estate sectors, rising from 32.9% in 2021 to 36.4% in 2024. Notably, the high-tech manufacturing sector is also climbing, boosting its representation within the overall manufacturing investment framework.

In conclusion, as we transition towards the start of 2025, key economic indicators suggest a prepared and resilient economy set to thrive amidst necessary adjustments