China's economy is limping into the new year, a batch of new data revealed on Wednesday, deepening a brutal stock market sell-off. JD.com and Baidu were among U.S.-listed Chinese stocks to take a beating.
Chinese GDP Slows In Q4
Chinese GDP grew 5.2% in the fourth quarter from the year-ago quarter, the National Bureau of Statistics said, coming in a touch below expectations. For the full year, Chinese GDP also grew 5.2%, which was the slowest growth since 1976 — with the exception of the Covid-hit 2020.
The picture looks even worse when you consider two things. China's economy grew just 1% in Q4 vs. Q3, down from 1.3% the prior quarter. Until late 2022, China stuck to its zero-Covid lockdown policy, so the bounce in the first three quarters of 2023 came off very weak levels.
Second, once you take into account deflating prices that fell 1% last year, nominal GDP growth in 2023 was just 4.2% last year, noted Deutsche Bank strategist Jim Reid.
"Nominal GDP growth is obviously very important for many things including debt ratios, property markets and earnings. So this would help explain the continued weakness in Chinese equities and property markets."
China's Population Falls
Among the other gloomy highlights: December retail sales grew 7.4% vs. a year ago, below forecasts of 8% growth.
Beijing, after suspending its measure of young adult unemployment that hit 21.3% last June, began to publish a modified measure. December data showed unemployment among those age 16 to 24 at 14.9%, but economists noted that number no longer includes jobseekers in school. Meanwhile, the broader urban unemployment rate edged up to 5.1% from 5%.
The statistics agency also reported that China's population fell by 2.08 million, or 0.15%, to 1.409 billion, Reuters reported.
Chinese Stocks: BIDU, JD, BABA
Hong Kong's Hang Seng Index fell 3.7% on Wednesday, nearing the 13-year low touched amid Covid lockdowns in October 2022. The Shanghai/Shenzen CSI 300 Index fell 2.2% and is now down 21.8% from a year ago, near its lowest level in five years.
Among Chinese stocks taking a hit in U.S. stock market action on Wednesday, JD.com fell 4.9%, Baidu 3%, and Alibaba 1.6%.
China's Economy: What It Means For Investors
Chinese Premier Li Qiang revealed the GDP data on Tuesday in a speech at the World Economic Forum conference in Davos, Switzerland. The Wall Street Journal reported that Qiang's remarks were meant to tout China's economic strength, highlighting its ability to bounce back without major stimulus.
However, that may have been taken as an indication that Beijing will again eschew massive stimulus in 2024, a negative for stocks. Still, Chinese stocks also felt a downdraft from Tuesday's speech by Federal Reserve Gov. Christopher Waller, which supported a go-slow approach to rate cuts.
Recent news out of China is a negative for prices of commodities such as copper and oil, but it isn't all bad for U.S. investors. "The U.S. is continuing to import deflation from China," strategist Ed Yardeni wrote on Jan. 15. That gives the Fed more flexibility to cut interest rates without worrying about an inflation resurgence.
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