China awaits whether US interest rate cut, better ties bring economic tailwinds in 2024

Analysts expect that Chinese leaders will maintain a GDP growth target of around 5 per cent for 2024 to allow room for de-risking

And economists generally expect that the US’ most aggressive rate-rising cycle in 40 years will end soon, and that the first interest rate cut could come as early as mid-2024

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Some economists say that the Chinese economy, in terms of exports and capital flow, has a lot riding on whether US-China ties continue to improve in an election year. Photo: Reuters

Published: 6:00am, 8 Dec 2023Updated: 9:10am, 8 Dec 2023

China’s top leaders are expected to assemble soon at the central economic work conference in Beijing to hammer out economic goals for 2024. This is the third part in a series looking at what to expect from China’s economy next year.

When Chinese leaders assemble in the coming days to examine the nation’s bumpy post-Covid recovery and set next year’s growth targets, external uncertainties look to be prioritised during their closed-door discussions.

Pundits have pointed to the positive impact for China of potential interest rate cuts by the US Federal Reserve, which could reduce pressure on the yuan and result in a greater inflow of capital. However, there are concerns about how Washington’s policymakers will behave during the coming election year, and how their actions could disrupt the world’s second-largest economy.

“It’s mainly about Fed rate decisions and the American presidential race, when we talk about if China will have a stable outside environment,” said Zhu Feng, dean of the Institute of International Relations at Nanjing University.

External uncertainties are carefully considered in setting Beijing’s domestic priorities. Following the central economic work conference a year ago, authorities warned of a “volatile” international environment and the impact it could have on China’s economy, as they set an “around 5 per cent” gross domestic product (GDP) target for 2023.

Fed cuts would benefit the Chinese economy in the short run and allow for greater manoeuvring in China’s monetary policy

Zhang Jun, Fudan University

Many economists, including Chinese and Americans, expect that the US’ most aggressive rate-rising cycle in 40 years – totalling 525 basis points since March 2022 – will end soon, and that the first interest rate cut could come as early as mid-2024.

SCMP Series

What to expect from China’s economy in 2024

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