An Assessment of China’s Economy through Data

The newly released World Economic Outlook Update announced at the 2016 Spring Meetings of the IMF held in Washington, D.C. from April 12 to 17 an adjustment in China’s economic growth of 0.2 percentage points up to 6.5 percent in 2016, and estimated an economic growth of 6.3 percent in 2017. Managing Director of the IMF Christine Lagarde explained, “We have switched to a much higher expectation of China’s economy due to the Chinese government’s formulation of policies to stimulate the economy.”

During the same period, the National Bureau of Statistics of the People’s Republic of China also publicized the economic data for the first quarter, among which GDP maintained a year-on-year growth of 6.7 percent. Both policy makers and specialists agreed on the results as they accorded with their expectations. But some positive changes highlighted in the data have aroused attention.

First, the industrial structure continues to optimize. In the first quarter, the added value of the tertiary industry increased 7.6 percent, and the proportion of the tertiary industry in GDP reached 56.9 percent, two percentage points higher than last year. At the same time, a huge potential exists for the development of the tertiary industry, since foreign capital tends to add more investments. The total investment in service projects nearly doubled the amount of capital used for manufacturing projects. Multiple areas are in desperate need of qualified services, including the senior care industry, healthcare industry, and entertainment, film and TV industry, thus providing abundant business opportunities for both domestic and foreign capital.

Second, the traditional manufacturing industry has shown substantial improvements. In the first quarter, strategic emerging industries saw an increase of 10 percent, high-technology industry of 9.2 percent, and equipment manufacturing industry 7.5 percent. In addition, the new energy vehicles output maintained rapid growth of over 80 percent. Fast growth has also been achieved in areas such as medical equipment, smart electronic products, and environment protection related equipment, with a 27.8 percent growth in Internet retail sales.

Meanwhile, China’s economy has preliminarily transitioned into a low-carbon and green development mode, which has achieved a year-on-year decrease of 5.3 percent in energy consumption per unit of GDP in the first quarter. This is predominantly due to the elimination of a large number of high energy and resource consuming industries during the implementation of supply-side structural reform, and the process of cutting excessive inventory and overcapacity.

The above statistics indicate that China’s economy is approaching an initial stabilization, but the prospect is still mainly dependent on the effect of supply-side structural reform.

On May 1, 2016, business tax was abolished and the valueadded tax pilot expanded to include the construction industry, real estate, financial sector, and life services. It is estimated that over RMB 500 billion taxes will be cut this year owing to the new measure. The biggest beneficiary will be the life services industry, which enjoys a 40 percent reduction in its total taxes.

Moreover, huge development potentials are created in the process of urbanization, especially in the central and western regions. By the year 2030, China’s urbanization rate will reach around 70 percent, which means a considerable number of rural residents will move to urban areas, bringing investment opportunities to real estate and infrastructure construction, as well as upgrading the consumption structure to suit urban residents who have relocated from rural areas.

With regard to attracting foreign investment, the same conclusions can be made. The first quarter witnessed contracted foreign capitals of US $ 6.66 billion and US $ 3.93 billion in central and western regions respectively, representing a growth of 17.8 percent and 17.4 percent compared to the same period last year. In particular, the amount of foreign direct investment in western regions has reached US $3.33 billion, a year-on-year increase of 42.5 percent, higher than the national growth rate.

The implementation of the Belt and Road Initiative has boosted investment and trade between China and countries along the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. A total of 558 foreign-invested enterprises from nations along the routes were set up in the first three months, representing a year-on-year increase of 21.6 percent.

Opportunities are shared between both the Chinese market and the global market. According to IMF statistics, China’s trading volume has accounted for one tenth of global commerce, and China is among the top 10 largest trading partners of over 100 countries globally. China’s future transformation will also have major effects on the global economy and production. In 2015, though China’s GDP took only 16 percent of the world total amount, its contribution to the global economy surpassed 25 percent. Therefore, a sustained financial market and steady economic development in China signify the economic advancement of both China and the world.