Asian Shares Slip as China Reports 5% Growth in 2024

The Asian stock markets have been on a rollercoaster ride in recent weeks, with shares slipping on Friday as China reported its economic growth for 2024. The world's second-largest economy expanded at a 5% annual pace, slightly exceeding the median estimate of 4.9% in a Bloomberg survey. However, the growth figure came in the face of a "complicated and severe environment with increasing external pressures and internal difficulties," according to the National Bureau of Statistics.

The 5% expansion was in line with the target set by Beijing but the weakest since 1990 -- excluding the pandemic years -- as leaders fought to address weak consumption and a painful debt crisis in the vast property sector. A survey of 12 economists by AFP forecast growth of 4.9 percent, while a surge in the final quarter, helped by a string of stimulus measures, and a boost in retail sales were unable to inject much optimism onto trading floors, which were already cautious as dealers prepare for Donald Trump's second term amid fears of another China-US trade war.

The Chinese economy grew at a 5.2% annual rate in 2023, and economists have forecast that it will slow further in coming years. The government reported Friday that the population fell for a third straight year in 2024, to 1.408 billion at the end of 2024, a decline of 1.39 million from the previous year. The rising cost of living has caused young people to put off or rule out marriage and childbirth while pursuing higher education and careers, accentuating the impact of birth control policies that once limited most families to one child each.

The Chinese economy's growth target of around 5% for 2024 is expected to have both short-term and long-term impacts on Asian stock markets. In the short term, the announcement of the growth target may initially boost market sentiment, as investors may view it as a sign of confidence in the Chinese economy. This could lead to increased buying activity, driving up stock prices in the short term. However, the actual impact will depend on various factors, such as the effectiveness of policy measures, global economic conditions, and geopolitical risks.

In the long term, achieving the growth target will require increased investment and consumption in the Chinese economy. This could lead to higher demand for goods and services from Asian countries, driving up their corporate earnings and stock prices in the long term. Additionally, China's economic growth could also drive regional integration, as countries in the region may seek to capitalize on China's growth by strengthening their economic ties with it. This could lead to increased trade, investment, and cooperation, benefiting Asian stock markets in the long term.

However, the relationship between the Chinese and ASEAN stock markets has shown a bidirectional Granger causality relationship with time-varying characteristics. Before the COVID-19 outbreak, the interaction between the Chinese and ASEAN stock markets was mainly positive. However, after the COVID-19 outbreak, during the off-peak period, the interaction between the Chinese and ASEAN stock markets was positive or negative at different periods; during the peak period of the epidemic, the ASEAN stock markets had negative impacts on the Chinese stock market. This relationship has been enhanced during COVID-19, indicating that major events such as COVID-19 have a greater impact on the relationship between the Chinese and ASEAN stock markets.

Geopolitical tensions, such as US-China trade relations, can also significantly influence Asian stock markets. For example, when Donald Trump was elected as the US President-elect in 2024, there were fears of another China-US trade war, which negatively impacted Asian stock markets. The Chinese economy grew at a 5% annual pace in 2024, the weakest since 1990 -- excluding the pandemic years -- as leaders fought to address weak consumption and a painful debt crisis in the vast property sector. The 2024 growth figure came in the face of a "complicated and severe environment with increasing external pressures and internal difficulties," the National Bureau of Statistics said.

In conclusion, the Chinese economy's growth target of around 5% for 2024 is expected to have both short-term and long-term impacts on Asian stock markets. The announcement of the growth target may initially boost market sentiment, leading to increased buying activity and driving up stock prices in the short term. However, the actual impact will depend on various factors, such as the effectiveness of policy measures, global economic conditions, and geopolitical risks. In the long term, achieving the growth target will require increased investment and consumption in the Chinese economy, leading to higher demand for goods and services from Asian countries and driving up their corporate earnings and stock prices. Additionally, China's economic growth could also drive regional integration, benefiting Asian stock markets in the long term. However, the relationship between the Chinese and ASEAN stock markets has shown a bidirectional Granger causality relationship with time-varying characteristics, which can be influenced by geopolitical tensions.