China's economy is entering a 'structural hard landing' as growth will remain low

• China's economy will struggle for at least the next year, TS Lombard strategists said.
• The research firm estimated China's growth would remain under 5% through 2024.
• That's because monetary easing efforts will take time to kick in and rev up the economy.

China's economy won't improve much anytime soon as growth will remain low over the next year, according to TS Lombard strategists.

The research firm forecasted that growth would stay under 5% through 2024 — compared to double-digit rates across much of the past 20 years. That implies the nation's economy will slip into a "structural hard landing," strategists said.

Sluggish growth has largely been caused by the People's Bank of China keeping monetary policy tight through the second half of 2022, as central bankers wrongly expected the economy to see higher inflation after dialing back zero-COVID restrictions.

But the opposite happened: China has seen a so-far disappointing economic reopening, with weak demand causing the nation to slip into deflation this summer. 

Meanwhile, turmoil in China's real estate and stock market helped wipe away recent wealth gains, which initially was thought would help economic growth once China's economy reopened.

"Chinese release of pent-up demand was a one-shot behavioral boomlet that fizzled out almost as soon as it started," strategists said in a note on Wednesday. "While the PBoC quickly realized its mistake and began loosening again Q1 the damage to liquidity conditions and to growth had already been done." 

It will take time for monetary easing efforts to take effect in the economy, the note added, meaning China will likely suffer from poor growth over the near term.

Growth will likely bottom out on a yearly basis in the first quarter of 2024 and should start to pick up "mildly" around the middle of next year, TS Lombard predicted.

Monthly data should stabilize late in the fourth quarter, though momentum in the economy will be thin for most of 2024, it added.

Other analysts have warned of long-term problems for China's economy, given that the nation is also slammed with high debt levels and an aging population. That could mean China risks a lost decade, some economists say, a period of stagnation similar to the one that ate away at Japan's economy in the 90s.