Howard Marks, co-chairman, Oaktree Capital.
Courtesy David A. Grogan | CNBC
Billionaire investor Howard Marks said he was hopeful about China’s economy, but cautioned that the country’s growth target was a monumental challenge.
“I’m still optimistic on China’s long-term possibilities, as long as they execute well and as long as they remain constructive with regard to the rest of the world,” the co-chairman of Oaktree Capital Management said.
Marks told CNBC’s Emily Tan on the sidelines of the third Global Financial Leaders Investment Summit hosted by the Hong Kong Monetary Authority that “Even though the growth rate they [China] are targeting sounds modest compared to their history, it’s still very much above average for for the rest of the world, and will represent a Herculean challenge.”
China has set a growth target of “around 5%” for 2024, though Bank of America and Citigroup, among others, have projected the world’s second-largest economy will grow at under 5%.
The World Bank has pegged China growth in 2024 at 4.8%, and expects it to decline further to 4.3% next year, despite a recent slate of measures to boost the economy. Chinese authorities have ramped up stimulus rollouts since late September.
The World Bank cited headwinds such as sluggish Chinese consumer spending, a struggling property market and an ageing population as key concerns for the world’s second-largest economy.
“You can’t produce economic growth through stimulus perpetually. So their growth rate is abating, their use of stimulus is abating, and they’re trying to engineer the right combination,” Marks said, adding that he was hopeful China will be able to meet the challenges.
Earlier this month, China unveiled a five-year plan worth 10 trillion yuan ($1.4 trillion) to address local government debt issues, while indicating that additional economic support would be provided next year. This followed Donald Trump’s 2024 presidential win that has raised worries over increased tariffs on Chinese exports.
The People’s Bank of China in September cut the reserve requirement ratio (RRR) by 50 basis points to infuse more liquidity into the Chinese economy, with banks now required to hold less cash on hand. The same month, President Xi Jinping led a meeting emphasizing the need to enhance fiscal and monetary support while working to halt the decline in the real estate market.
“But when there’s too much stimulus in an area like property, and you get too many buildings built, then you have to go through a period of adjustment,” said Marks.