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, the factors sustaining long-term healthy growth are accumulating, and it’s reasonable to feel a sort of cautious optimism about the country’s economic development going forward.
According to the National Bureau of Statistics, judging from the cumulative situation over the past five months, production and supply have continued to increase, and consumption and investment have gradually recovered. The added value of industrial enterprises above a designated size increased by 3.6 percent year-on-year, the same as that from January to April. The national service industry production index increased by 9.1 percent year-on-year, 0.7 percentage points faster than January to April. The national fixed asset investment (excluding rural households) increased by 4 percent year-on-year. Total retail sales of consumer goods increased by 9.3 percent year-on-year, 0.8 percentage points faster than January to April.
The official tone is that the economic operations 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, and investment in high-tech industries increased by 12.8 percent.
In particular, the new-energy automobile industry has achieved excellent growth. From January to May, production was above 3 million units (up 45.1 percent year-on-year), with sales of 2.94 million units (up 46.8 percent year-on-year). Given the fact that the export value of the so-called three new products — new energy vehicles, lithium-ion batteries and solar cells — increased by 172.4 percent, 78.5 percent, and 23.6 percent respectively over the same period last year, they are regarded as the new kinetic energy of China’s economic development and point toward industrial upgrades and development.
As far as trade is concerned, from January to May, the country’s total foreign trade imports and exports to countries participating in the Belt and Road Initiative increased by 13.2 percent year-on-year and continued to maintain rapid growth. In May, 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.
Even so, the Chinese government is cautious enough to emphasize the constraints it faces both domestically and abroad. It has set a modest GDP growth target of around 5 percent for this year, in contrast to some mainstream Western institutions such as the IMF and Morgan Stanley, whose initial GDP forecast for China were 5.2 percent and 5.7 percent, respectively. 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. Demand remains insufficient, and economic transformation and upgrading are facing new obstacles.
As a spokeswoman for the NDRC said in May, the added value of China’s industrial enterprises above a designated size increased by 3.5 percent year-on-year, a decrease of 2.1 percentage points from the previous month. The 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. 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 level 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 a decline was in 2020.
However, the Chinese government is also 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, and as market demand gradually recovers and the supply structure continues to adjust, it is believed that the momentum of the country’s economic development will continue to increase, that things will continue to improve.
Six aspects have been listed as the focus for the days to come:
• First is to promptly formulate and introduce policies to restore and expand consumption and unleash the potential of the service sector — especially in automobile consumption.
• Second is to accelerate the implementation of 102 major projects in the 14th Five-Year Plan; promote the construction of energy, water conservancy, transportation and other major infrastructure; give play to the guiding role of government investment and policy incentives; and effectively stimulate private investment.
• Third is to accelerate the construction of a modern industrial system supported by the real economy, focus on breakthroughs in 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 investment.
• Fifth is to strengthen the priority of employment, expand employment channels, increase the incomes of urban and rural residents and effectively protect and improve people’s livelihoods.
• Sixth is to ensure the supply of grain production and important agricultural products — along with the supply of electricity — effectively preventing and defusing risks in key areas.
In sum, the current slowdown of China’s economic growth is a natural reflection of the country’s development at an important juncture of restructuring and upgrading its economy at which efficiency and quality, rather than quantity, are what really count. In this sense, obstacles — whether internal or external — also have their silver linings in setting the direction for a healthier and more balanced economy in the long-run.
