Top of main content
China in Focus: Five key macro themes for 2024

25 Jan 2024

Key takeaways

  • We anticipate a soft landing for property in 2024; social

    housing to offset weakness in the broader real estate market

  • Fiscal policy will lead the way; enhanced coordination

    between policymakers to smooth structural transitions

China data review (December, Q4 2023) [@source-wind-hsbc]

  • Real GDP growth climbed to 5.2% y-o-y in Q4 2023, with full-year growth reaching 5.2%, meeting the official government growth target of “around 5%”. The economy ended 2023 mixed: inflation remained weak, exports improved, and financing data continued to highlight lacklustre bank lending. Property remained the most challenging sector, while consumption was a key growth driver and manufacturing remained a key supporting factor in investment.
  • Industrial production gained more traction in December picking-up 6.8% y-o-y on the back of a rise in domestic demand. Manufacturing activities outperformed, led by auto production, which rose 20.0% y-o-y. Meanwhile, other high-end technology activities also maintained momentum – electrical machinery rose 10.1% y-o-y and computer & communications 9.6% y-o-y.
  • Retail sales growth slowed to 7.4% y-o-y in December as the favourable base effect faded, with property-related goods still the major laggard. Services-related sales remained the bright spot. Over the course of 2023, services consumption revived amid normalised offline activities, and services-related retail sales rose 20.0% y-o-y. Notably, restaurant & catering sales maintained double-digit growth in every month and rose 37.7% y-o-y in December.
  • Headline CPI inflation dropped by 0.3% y-o-y in December, with the main drag continuing to stem from food and energy prices. Pork prices (-26.1% y-o-y) led the overall decline in food prices (-3.7% y-o-y), while softer global oil moved energy prices lower. However, core CPI remained steady at 0.6% y-o-y amid a pick-up in consumption demand, as both tourism, and entertainment and culture prices moved higher.
  • Exports grew 2.3% y-o-y in December, boosted by a low base. By region, exports to the US, the EU and ASEAN contracted but picked up to Africa and Latin America. By product, auto exports were the stand out, rising by 52% y-o-y. Imports, on the other hand, reverted to positive growth of 0.2% y-o-y, supported by ordinary imports, given a pick-up in domestic demand, and rising key commodity imports on the back of resilient infrastructure investment.

Five key macro themes for 2024

As we enter 2024, China’s economy will require strong policy support, led by fiscal measures, to keep traditional growth engines, such as housing and infrastructure, ticking over, while helping new growth areas to accelerate. This approach will help to sustain consumption momentum into the coming quarters. We highlight five macro themes that will support GDP growth in 2024. 

A soft landing for the property sector

New dual-track policy model to absorb oversupply

Our base case is for a soft landing for China’s housing market in 2024. The new dual-track policy model – which aims to supply more social housing, while facilitating healthy development of the commercial real estate sector – should absorb oversupply and help the broader property sector rebalance. Policymakers have also shown their willingness to support the housing market, as reflected by the RMB350bn injection of financing last December.

Resilient consumption to benefit the wider economy

Consumption to drive over two-thirds of GDP growth

Consumption has been the driving force of the economic recovery, contributing c80% of GDP growth in 2023; we expect this robust growth to continue in 2024. The stabilisation of the housing market should boost consumer confidence, while the country’s recent move to prioritise social welfare has the potential to further unleash consumer spending. We believe resilient consumption will continue to drive more than two-thirds of the growth in GDP. 

Enhanced policy coordination

Policy coordination and fiscal stimulus driving growth

China has ramped up policy support since 4Q23, with one particularly positive development being the emphasis on better policy coordination. Fiscal policies will lead the way, with the central government playing a bigger role, which we think represents a major shift in strategy. Furthermore, the broadly defined fiscal deficit may reach c8%, similar to 2023 levels, while the central bank will likely further cut the reserve requirement ratio to keep liquidity ample.

New economy to shine; old economy to tick over

Policy support will allow old growth engines to tick over

Despite promising developments in the “new economy”, especially on the electric vehicle front, we think the scale is still too small to offset the slowdown of the old growth engines, such as manufacturing, infrastructure and property. However, growing support for property and local governments will allow the old engines to tick over, leaving room for the new drivers, like electric vehicles, lithium batteries and solar cells, to flourish, backed by favourable policies. 

Emerging from the shadow of deflation

Food should be less of a drag on inflation in 2024

Although China’s GDP deflator stayed in contractionary territory for most of 2023, we are cautiously optimistic that it can turn positive in 2024. Volatile components like food have weighed on consumer price index (CPI) inflation but should be less of a drag in 2024. Commodity prices also face upside risks against a backdrop of heightened geopolitical tensions and the potential stabilisation of the domestic housing market. 

Source: Refinitiv Eikon
* Past performance is not an indication of future returns Source: Refinitiv Eikon. As of 17-Jan-2023 market close

Start Your Financial Health Check

Take your financial health check and that will help you to understand your needs, make and achieve your financial plan

Wealth Management

Your goals are unique to you. We’ll help you reach them – first by assessing your situation, then by helping you put a plan in place

Related Insights

As we start a new year, it looks set to be characterised by rate cuts and elections…[18 Jan]
Consumption remains a key pillar of growth and is likely to sustain momentum in the coming...[20 Dec]
Services demand continues to lead China’s economic recovery although headwinds persist in...[30 Nov]
Major central banks may be done with tightening, but they are likely to keep rates at an... [10 Nov]

Disclosure appendix

Additional disclosures

1. This report is dated as at 19 January 2024.

2. All market data included in this report are dated as at close 18 January 2024, unless a different date and/or a specific time of day is indicated in the report.

3. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

4. You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument or of an investment fund.


This document is prepared by The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’), 1 Queen’s Road Central, Hong Kong. HBAP is incorporated in Hong Kong and is part of the HSBC Group. This document is distributed by HSBC Bank Canada, HSBC Continental Europe, HBAP, HSBC Bank (Singapore) Limited, HSBC Bank (Taiwan) Limited, HSBC Bank Malaysia Berhad (198401015221 (127776-V))/HSBC Amanah Malaysia Berhad (200801006421 (807705-X)), The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India), HSBC Bank Middle East Limited, HSBC UK Bank plc, HSBC Bank plc, Jersey Branch, and HSBC Bank plc, Guernsey Branch, HSBC Private Bank (Suisse) SA, HSBC Private Bank (Suisse) SA DIFC Branch, HSBC Private Bank Suisse SA, South Africa Representative Office, HSBC Financial Services (Lebanon) SAL, HSBC Private banking (Luxembourg) SA and The Hongkong and Shanghai Banking Corporation Limited (collectively, the “Distributors”) to their respective clients. This document is for general circulation and information purposes only. This document is not prepared with any particular customers or purposes in mind and does not take into account any investment objectives, financial situation or personal circumstances or needs of any particular customer. HBAP has prepared this document based on publicly available information at the time of preparation from sources it believes to be reliable but it has not independently verified such information. The contents of this document are subject to change without notice. HBAP and the Distributors are not responsible for any loss, damage or other consequences of any kind that you may incur or suffer as a result of, arising from or relating to your use of or reliance on this document. HBAP and the Distributors give no guarantee, representation or warranty as to the accuracy, timeliness or completeness of this document. This document is not investment advice or recommendation nor is it intended to sell investments or services or solicit purchases or subscriptions for them. You should not use or rely on this document in making any investment decision. HBAP and the Distributors are not responsible for such use or reliance by you. You should consult your professional advisor in your jurisdiction if you have any questions regarding the contents of this document. You should not reproduce or further distribute the contents of this document to any person or entity, whether in whole or in part, for any purpose. This document may not be distributed to any jurisdiction where its distribution is unlawful.

The following statement is only applicable to HSBC Bank (Taiwan) Limited with regard to how the publication is distributed to its customers: HSBC Bank (Taiwan) Limited (“the Bank”) shall fulfill the fiduciary duty act as a reasonable person once in exercising offering/conducting ordinary care in offering trust services/business. However, the Bank disclaims any guaranty on the management or operation performance of the trust business.

The following statement is only applicable to by HSBC Bank Australia with regard to how the publication is distributed to its customers: This document is distributed by HSBC Bank Australia Limited ABN 48 006 434 162, AFSL/ACL 232595 (HBAU). HBAP has a Sydney Branch ARBN 117 925 970 AFSL 301737.The statements contained in this document are general in nature and do not constitute investment research or a recommendation, or a statement of opinion (financial product advice) to buy or sell investments. This document has not taken into account your personal objectives, financial situation and needs. Because of that, before acting on the document you should consider its appropriateness to you, with regard to your objectives, financial situation, and needs.

Important Information about the Hongkong and Shanghai Banking Corporation Limited, India (“HSBC India”)

HSBC India is a branch of The Hongkong and Shanghai Banking Corporation Limited. HSBC India is a distributor of mutual funds and referrer of investment products from third party entities registered and regulated in India. HSBC India does not distribute investment products to those persons who are either the citizens or residents of United States of America (USA), Canada, Australia or New Zealand or any other jurisdiction where such distribution would be contrary to law or regulation.

Mainland China

In mainland China, this document is distributed by HSBC Bank (China) Company Limited (“HBCN”) and HSBC FinTech Services (Shanghai) Company Limited to its customers for general reference only. This document is not, and is not intended to be, for the purpose of providing securities and futures investment advisory services or financial information services, or promoting or selling any wealth management product. This document provides all content and information solely on an "as-is/as-available" basis. You SHOULD consult your own professional adviser if you have any questions regarding this document.

The material contained in this document is for general information purposes only and does not constitute investment research or advice or a recommendation to buy or sell investments. Some of the statements contained in this document may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. HSBC India does not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investments are subject to market risk, read all investment related documents carefully.

© Copyright 2024. The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED.

No part of this document may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited.

Important information on sustainable investing

“Sustainable investments” include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors (collectively, “sustainability”) to varying degrees. Certain instruments we include within this category may be in the process of changing to deliver sustainability outcomes.

There is no guarantee that sustainable investments will produce returns similar to those which don’t consider these factors. Sustainable investments may diverge from traditional market benchmarks.

In addition, there is no standard definition of, or measurement criteria for sustainable investments, or the impact of sustainable investments (“sustainability impact”). Sustainable investment and sustainability impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.

HSBC may rely on measurement criteria devised and/or reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of sustainability impact will be achieved.

Sustainable investing is an evolving area and new regulations may come into effect which may affect how an investment is categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.