Key Insights

The economic data from December proved to be quite a surprise for many analystsThe GDP growth in the fourth quarter reached an impressive 5.4%, significantly higher than the expected 5.0%, and was a notable increase from the 4.6% growth recorded in the third quarterThe annual economic target of 5% was unexpectedly metSome skeptics even suggested that there might be discrepancies in the data, as the perceived improvement in the economy does not feel pronounced.

What could be the reasons behind this unexpected figure?

Internationally, the optimism can be attributed to the imminent inauguration of the next US president, encouraging European and American traders to ramp up imports before new tariffs are in place, creating a pronounced export effect

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In December, exports reached $335.63 billion, marking a year-on-year growth of 10.7%, an increase of 4 percentage points from November. Notably, exports to the United States saw a robust 15.6% growth, which was particularly striking! This surge is corroborated by the industrial value-added data, where products like computers, photovoltaic systems, generators, and industrial robots also experienced growth.

On the domestic front, two major factors played a role in this upward trend; first is the implementation of a trillion-yuan debt-reduction project that revitalized previously stalled infrastructure projects, causing noticeable spikes in cement and steel production

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Secondly, the "trade-in" consumer incentive, which stimulated the upgrade of consumer goods, primarily in home appliancesI even purchased one such appliance myself; just a few years ago, a refrigerator cost me 3,000 yuan, but the same model is now available for only 2,000 yuan, a perfect time to buy one for my mother!

The situation appears overwhelmingly positive at first glanceNevertheless, there are underlying concerns worth noting.

Firstly, fixed asset investments are still on the decline, especially in real estate, which continues to struggle

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The impact of the '924' stimulus appears to be waning, as evidenced by the diminishing number of cities experiencing a rise in second-hand housing pricesCurrently, the manufacturing sector seems to be the backbone supporting the economy.

Secondly, the sustainability of consumer incentives is limited; such impulses are often cyclicalFor instance, once households replace old appliances, their purchasing power will diminish until the next need arises.

Finally, the premature stimulus in exports raises concerns; when the newly elected US president begins to take action, it is likely exports will again decline, putting additional pressure on the economic outlook for the next few quarters.

However, focusing too far ahead can also be detrimental

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As the Spring Festival approaches, many activities are currently on hold with no new policies, leading to a seasonal decrease in economic activities.This makes the prevailing expectations critical; even the slightest interaction between economic powerhouses can create enormous ripples in the market, driving the Nasdaq Golden Dragon Index to soar.

Clearly, this recent GDP data has bolstered market confidence significantly, with cultural goods experiencing persistent price increases; however, it remains to be seen how long this optimistic sentiment can be maintained

Observations continue, and while there is present strength in the markets, it may be wise to tread cautiously and wait for market emotions to soften before making strategic moves.

1. Overall: GDP growth exceeds expectations!

According to the National Bureau of Statistics, the economic performance for 2024 reveals preliminary estimates showing a GDP of 13,490.84 billion yuan for the year, reflecting a stable 5% growth compared to last year, successfully meeting the annual growth targetThe GDP growth for the fourth quarter soared to 5.4%, far surpassing the market forecast of 5.0%.

Truth be told, I was somewhat surprised by these figures, especially considering the dismal data from October and November

If the GDP saw a growth of 5.4% in the fourth quarter, it primarily indicates that December must have delivered unexpectedly strong growth, significantly supporting the fourth quarter's overall numbers.

2. Industrial Added Value: Manufacturing is the main engine of growth

In December, the added value of industrial enterprises above designated size increased by 6.2 % year-on-yearIn month-on-month terms, the industrial added value rose by 0.64 % compared to the previous monthDecember saw a clear acceleration in industrial added value growth, with an increase of 0.8 percentage points compared to November's growth of 5.4 %.

Breaking it down by sector, in December the mining industry's added value increased by 2.4 % (down from November's 4.6 %), the manufacturing sector experienced a growth of 7.4 % (up from November's 6.0 %), while the production and supply of electricity, heat, gas, and water rose by 1.1 % (down from November's 1.6 %). Clearly, the manufacturing industry's accelerated growth was the primary force behind the December uptick.

Diving deeper into various economic sectors, in December state-owned enterprises saw a 3.1% increase (down from 3.9 %), shareholding enterprises rose by 6.5 % (up from 6.0 %), foreign and Hong Kong-Macau-Taiwan funded enterprises grew by 5.6 % (up from 3.4 %), while private enterprises increased by 5.7 % (up from 4.5 %). This indicates a more significant contribution to December's growth from private enterprises, contrasting the previous dominance by state-owned enterprises.

When examining absolute values and growth rates, we see notable increases in the production of generators (17.9%), solar batteries (20.7%), microcomputer equipment (8.9%), industrial robots and rough steel production.

The automotive manufacturing sector saw a 17.7% increase (up from 12%) in production, and transport equipment manufacturing showed a growth of 10.6%. Furthermore, electrical equipment manufacturing rose by 9.2% while computer, communication, and electronic device manufacturing increased by 8.7%.

These results indicate that, influenced by the trillion-yuan debt program, certain key infrastructure projects have started up again, increasing demand for cement and steel

Additionally, there has been a notable rebound in the exports of critical equipment like electronics, generators, solar resources, and vehicles.

3. Exports: A notable surge from pre-export rush.

Customs data shows that the total import and export volume in December reached $566.42 billion, a year-on-year growth of 6.5%, an increase of 4.4 percentage points from November, with an annual cumulative growth of 3.8%. In particular, exports hit $335.63 billion, reflecting a 10.7% year-on-year growth, and a significant increase of 4 percentage points month-on-month, while imports totaled $230.79 billion, showing only a modest year-on-year increase of 1.0%.

In terms of the export destinations, in December, exports to the United States, European Union, Canada, and Japan respectively grew by 15.6%, 8.8%, -0.7%, and -4.2%, with respective changes of 7.6, 1.5, 2.2 and -10.6 percentage points from the previous month

The pre-export rush effect is clearly evident.

4. Fixed Asset Investment: Continuing decline raises concerns

Simply focusing on exports is insufficient; we must consider investments, which are necessary for creating sustainable demandHowever, we observe that the growth rate of fixed asset investments fell again in December, now at only 3.2%.

This indicates that while some funding is available for debt reduction, the stronger figures may actually reflect ongoing construction on existing projects rather than the initiation of new endeavorsTo illustrate this point, let's delve into the real estate situation.

5. Real Estate: The tide continues, with inventory accumulating

In terms of real estate, not much has changed

If someone still harbors fantasies about the real estate market after years of downturn, it might be prudent to engage more with literature on the subjectFor December, real estate development investments plummeted to 1.0028 trillion yuan, down 10.6% year-on-year.

By the end of 2024, the inventory of unsold commercial properties reached 753 million square meters, up from 733 million at the end of November, reflecting a continuing problem of excess stock.

Analyzing real estate prices, in December, prices for newly built residential properties across 70 major cities saw an increase in 27 cities (up from 17 in November), representing 35.8%. However, the more accurate data comes from second-hand properties, with only eight cities (compared to eleven in November) like Shenzhen, Shanghai, and Beijing seeing price increases.

This suggests that the '924' stimulus policy had some effect, maintaining a progressive price trend seen in October and November

Nonetheless, it is evident that this upward price trend is already wavering in the second-hand housing market.

6. Income and Expenditure: Limited money available

In 2024, the per capita disposable income for residents reached 41,314 yuan, representing a nominal growth of 5.3% (with the first three quarters at 5.2%), while adjusting for price factors, the actual growth stood at 5.1%. Median consumption expenditure was 28,227 yuan, reflecting a nominal increase of 5.3% (lower than the third quarter's 5.6%), with the real growth also at 5.1%.

In simpler terms, while income grew, spending on consumption dropped

This raises an interesting question; could the income boost be attributed to stock market gains as rural residents' disposable income growth rate still stands at 6.6%, showing no improvement?

7. Consumption: Automobile sales show signs of fatigue, while trade-ins stimulate demand

Finally, let's examine the consumption situationIn December, the total retail sales of consumer goods reached 45,172 billion yuan, a year-on-year growth of 3.7%. Clearly, this is a significant improvement compared to November.

Specifically, in December, household appliances and audio-visual equipment saw a 39.3% year-on-year increase (up from 22.2% in November), while cultural and office supplies surged by 9.1% (compared to -5.9%). This indicates that the trade-in policy has effectively stimulated consumer spending.

On the contrary, car consumption has shown significant cooling, with growth rate in December at just 0.5%, down from 6.6% in November