The performance of China’s economy in the first half of 2023 has been steady and consistent. Though not as good as predicted by outside economists and institutions, with the state of recovery continuously improving, and the factors sustaining long-term healthy growth still accumulating, it is reasonable to feel cautious optimism about China’s future economic development.
According to the China National Bureau of Statistics, judging from the cumulative situation over the past five months, both production and supply continued to increase, and consumption and investment gradually recovered. The added value of industrial enterprises above designated size increased by 3.6 percent year-on-year, the same as from January to April. The national service industry production index increased by 9.1 percent year-on-year, which was 0.7 percentage points faster than from January to April. National fixed asset investment (excluding rural households) increased by 4 percent year-on-year. And total retail sales of consumer goods increased by 9.3 percent year-on-year, which was 0.8 percentage points faster than from January to April.
The official tone is that the economy on the whole is on a recovery trend. As pointed out by the National Development and Reform Commission, the service industry continued to pick up, maintaining a high level (54.5 percent) in May, and hot spot consumption such as car sales has grown rapidly, increasing by 27.9 percent year-on-year. The consumption of contact-based services such as catering and tourism has improved significantly.
At the same time, in the first five months, investment in fixed assets increased by 4.0 percent year-on-year, of which investment in manufacturing and infrastructure increased by 6.0 percent and 7.5 percent respectively. Investment in high-tech industries increased by 12.8 percent.
Of particular note, the new-energy automobile industry has achieved excellent growth. From January to May, 3 million vehicles were produced (up 45.1 percent year-on-year), with sales of 2.94 million (up 46.8 percent). Given the fact that the export value of the so-called “three new” products increased over the same period last year — new-energy vehicles (up 172.4 percent), lithium-ion batteries (up 78.5 percent) and solar cells (up 23.6 percent) — these are regarded as the new kinetic energy of China’s economic development and are pushing industrial upgrading and development.
In trade, from January to May the country’s total foreign imports and exports to countries involved in the Belt and Road Initiative increased by 13.2 percent year-on-year and continued to maintain rapid growth. In May, the total import and export volume increased by 0.5 percent year-on-year, in stark contrast to the decline in foreign trade in some emerging economies.
However, the Chinese government is cautious enough to emphasize the constraining factors it faces both domestically and abroad. It has set a modest GDP growth target of around 5 percent for this year, lower than some mainstream Western forecasts — for example, the IMF projects 5.2 percent, and Morgan Stanley projects 5.7 percent.
On April 28, the Political Bureau of the Communist Party of China Central Committee acknowledged that the endogenous driving force of China’s economy is not yet strong, that demand remains too low and economic transformation and upgrading are facing new obstacles.
According to a spokeswoman for the NDRC in May, the added value of China’s industrial enterprises above designated size increased by 3.5 percent year-on-year, a decrease of 2.1 percentage points from the previous month. Total retail sales of consumer goods increased by 12.7 percent year-on-year, a decrease of 5.7 percentage points from the previous month. And national industrial producer prices fell by 4.6 percent year-on-year, a month-on-month decrease of 0.9 percent.
In the same month, the national surveyed urban unemployment rate was 5.2 percent, unchanged from the previous month. The youth unemployment rate hit a new high at 20.8 percent, the highest since January 2018. Moreover, from January to May, private fixed asset investment experienced negative growth for the first time this year — a year-on-year decrease of 0.1 percent. The last time private investment experienced such a downturn was in 2020.
However, the Chinese government is confident that these pressures and challenges will not change the long-term positive trend of the country’s economy. As the effects of macroeconomic policies continue to emerge, as market demand gradually recovers and as the supply structure continues to adjust, it is believed that the growth momentum of the country’s economic development will continue, the structure will continue to improve and the overall picture will get better.
Six aspects have been listed as the focus for work in the days to come:
First is to promptly formulate and introduce policies to restore and expand consumption and unleash the potential of service sectors — especially in automobile consumption.
Second is to accelerate the implementation of “102 major projects” in the 14th Five-Year Plan (2021-25); promote the construction of energy, water conservancy, transportation and other major infrastructure and new infrastructure; give play to the guiding role of government investment and policy incentives; and effectively stimulate the vitality of private investment.
Third is to accelerate the construction of a modern industrial system supported by the real economy, focus on breaking through weak areas and expand and strengthen advantageous areas.
Fourth is to solidly promote reforms in key fields, making greater efforts to attract and use foreign investment and stabilize the fundamentals of foreign trade and foreign investment.
Fifth is to strengthen the priority orientation of employment, expand employment channels, increase the income of urban and rural residents and effectively protect and improve people’s livelihoods.
Sixth is to ensure the supply of grain and other important agricultural products, as well as the supply of electricity, effectively preventing and defusing risks in key areas.
In sum, the current slowing down of China’s economic growth is a natural reflection of the country’s development at an important juncture in the restructuring and upgrading of its economy. Efficiency and quality, rather than quantity, are what really count. In this sense, any obstacles, whether internal or external, also have their silver linings, as they point the way to a healthier and more balanced economy in the long run.
