Investing.com-- China's economy shows resilience but faces potential challenges due to limited policy support and external headwinds, according to Morgan Stanley (NYSE:MS) analysts.
While recent export and consumption figures provide reasons for optimism, underlying concerns over fiscal and housing policy measures highlight a more cautious outlook, analysts said in a note.
In its latest research note, Morgan Stanley outlines "bull" and "bear" scenarios for the world's second-largest economy.
On the positive side, Chinese export growth surged 10% in Q4 2024, up from 5.4% in the third quarter, driven by front-loaded shipments to the U.S. ahead of potential tariff changes under the incoming Trump administration, analysts wrote.
Consumption also showed strong momentum, with December sales of autos and home appliances benefiting from Beijing’s expanded consumer trade-in programs, potentially keeping GDP growth at 5% in annualized terms through Q1 2025.
However, Morgan Stanley analysts warn that these growth drivers might be short-lived.
Export front-loading and stimulus-induced consumer spending have reduced Beijing’s urgency for broader policy easing. In the housing market, softening prices and increasing discounts offered by sellers highlight weak buyer demand, according to Morgan Stanley.
Progress on reducing housing inventories remains limited, and local government bond issuance—key to infrastructure spending—continues at a sluggish pace despite measures to streamline approvals, analysts said.
Monetary policy space also appears constrained as Beijing prioritizes yuan stability amid global inflation risks, the analysts added. The potential for broader U.S. tariffs or evolving domestic social dynamics could change the outlook in later quarters, but current conditions suggest only moderate economic momentum.