Prepare for a new China

Get ready for a new China.

I spent some time in Australia recently, where I spoke to clients in several major cities and fielded a lot of questions about China’s economic prospects.

What I told them was, when it comes to trade with Asia’s biggest economy, Australia — like all countries around the world — is dealing with a new kind of China.

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China’s economy is undergoing massive structural changes. It’s moving away from a property market-driven economy towards a more tax-driven one.

The prospects for China’s growth are not a problem and won’t be in the near term. ANZ Research expects China to record gross domestic product growth of 5.1 per cent in 2025, and 4.8 per cent in 2026.

China’s biggest challenges right now are deflation and unemployment. ANZ Research expects policymakers to try to stimulate the economy, possibly leaning towards a more targeted approach rather than a big stimulus package.

In October, China will host its fourth plenum, where it will work to map out the direction of its economy over the next five years. My sense is that policymakers will push for structural reform alongside continued support of economic growth.

At the same time, over the next few months, China will still need to tackle issues around deflation and over-competition – or, as it is being called, “anti-involution”. The evolving size of China’s market and price-driven competition is exaggerating deflationary pressure.

China will hit its growth target in the end. How it gets there will be the interesting part.

Raymond Yeung is Chief Economist, Greater China at ANZ

The ANZ Research team has been recognised by clients as among the best in Asia Fixed Income Research in The Asset’s Local Currency and G3 Bonds surveys.

The Asset Surveys are the longest running of their kind in Asia, canvassing the judgement of institutional fixed income investors on the quality of sell side analysts.