Jan-Feb data fuels economic optimism
Better-than-expected industrial output, other signs bode well for full-year growth target, experts say
Economic momentum gained traction in China during the first two months of the year with better-than-expected performance of both supply and demand, setting a promising tone for a robust 2024.
Expressing strong confidence that the country will meet the annual growth target of around 5 percent, analysts projected a steadfast growth trajectory for the first quarter, with stimulus policies gradually taking effect.
Meanwhile, they cautioned that the outlook is still clouded by lingering challenges such as continued weakness in the property sector, structural constraints to growth and mounting uncertainties, and said that further policy easing and structural reforms to bolster confidence and reignite growth momentum are needed to achieve the annual growth target.
“The January-February economic performance laid a solid foundation for the year’s development,” Liu Aihua, a spokeswoman for the National Bureau of Statistics (NBS), said on March 18 at a news conference in Beijing.
Liu said the country has the conditions and capabilities to achieve its annual growth target this year, given the solid economic fundamentals, strengthening of factors driving recovery, and effective policy measures.
Figures released by the NBS showed that China’s January-February economic activity has been above expectations overall.
The country’s industrial output grew 7 percent year-on-year during the period after a 6.8 percent rise in December, while fixed-asset investment increased 4.2 percent year-onyear
during the same period, compared with 3 percent annual growth for 2023. Retail sales grew 5.5 percent year-on-year during the period, compared with 7.4 percent expansion in December, roughly in line with market expectations.
Zhou Maohua, a researcher at China Everbright Bank, said the better-than-expected figures point to stabilization of the economy, and that the country is expected to make a good start in the first quarter.
NBS data showed that property investment fell 9 percent year-on-year in China in the first two months of 2024, narrowing from a 9.6 percent decline in 2023.
Louise Loo, lead economist at British think tank Oxford Economics, said the property data was broadly consistent with the credit data published last week, which showed that credit demand remained sluggish at the start of the year.
“In particular, we continue to see weak bank lending to households — particularly in property-related medium- to long-term loans — amid a property sector struggling to find a floor and still-awful consumer sentiment,” she said.
Although the broader economy is still facing downward pressures, Li Xuesong, director of the Chinese Academy of Social Sciences’ Institute of Quantitative and Technological Economics, said favorable conditions outweigh unfavorable factors in China’s development, and the fundamental trend of economic recovery with a long-term positive outlook has not changed.
“China has solid foundations to pursue high-quality economic development, propelled by the ongoing technological revolution, the nation’s strong industrial base and the ultralarge domestic market,” Li said.
Li said the country will likely hit a high potential growth rate of around 4.5 percent annually until 2035.
The government has set an economic growth target of around 5 percent for 2024.
In setting the target, the need to boost employment and incomes and prevent and defuse risks has been taken into account, and the growth rate is well aligned with the objectives of the 14th Five-Year Plan (2021-25), according to the Government Work Report approved by the national legislature earlier this month.
Over the past decades, China’s economy has overcome odds such as the COVID-19 pandemic, natural disasters and the global financial crisis, and has managed to maintain consistent growth, helping invigorate the global economy.
Since 2014, the Chinese economy has reached one milestone after another, with the country’s GDP passing the 60-trillion-yuan ($8.34 trillion), 80-trillion-yuan, and 100-trillion-yuan marks in 2014, 2017 and 2020 respectively. More recently, it went on to pass the 110-trillion-yuan and 120-trillion-yuan marks despite the effect of the COVID-19 pandemic.
In 2023, the economy grew by 5.2 percent, and analysts believe that a growth rate of around 5 percent for this year is a goal that can be achieved through hard work.
Setting such a target helps boost confidence, guide public expectations, and further build consensus on development, said Zhou Li’an, a professor at Peking University.
Foreign-funded enterprises have been showing confidence in the Chinese market by increasing their investments or expanding their operations in the country.
For example, the number of stores operated by fast-food chain KFC has grown to surpass 10,000 across China. In January, Airbus opened in Chengdu, Sichuan province, a service center dedicated to the entire life cycle of an aircraft, the first such center outside Europe for the company.
A survey by the European Chamber of Commerce in China revealed that about 59 percent of surveyed companies view China as one of their top three investment destinations.
“China’s economy has sufficient internal driving force and great potential for sustained growth,” said Tian Xuan, vice-dean of Tsinghua University’s PBC School of Finance.
For sure, the country faces challenges, such as external shocks and uncertainties, constrained demand, and overcapacity in certain sectors. Yet, generally speaking, tailwinds outweigh the headwinds.
As a major manufacturing powerhouse, China boasts all the industrial categories listed in the UN industrial classification, and its manufacturing added value accounts for 30 percent of the world’s total. It is the world’s second-largest consumer market and the largest online retail market.
“The Chinese economy enjoys capability, advantages and opportunities to sustain growth, and the long-term positive trend remains unchanged,” said Wang Changlin, vice-president of the Chinese Academy of Social Sciences.
Huang Yiping, dean at the National School of Development, Peking University, said China can adopt stronger macroeconomic stimulus measures this year to boost demand and create more orders for enterprises.
“China’s economic performance will become better this year” on the back of a stronger proactive fiscal policy, and given the room for more monetary policy adjustments,” Huang said. “Talk about the United States halting interest rate hikes or even cutting the rates is also a factor.”
According to Huang, China still has room to further cut the reserve requirement ratio — the proportion of money that lenders must hold as reserves — and lower interest rates.
“It is advisable to lean on tools like interest rate cuts, as that will help alleviate financial burdens on businesses and households, and potentially stimulate demand,” he said.
Huang Zhuo, deputy dean of the National School of Development, expressed confidence in the country’s ability to achieve the target of 5 percent GDP growth this year.
He said the primary issue is restoring confidence among entrepreneurs, necessitating policies to alleviate burdens on enterprises and bolster business and consumer confidence. More efforts are also needed to alleviate the debt burdens of local governments and tackle debt issues plaguing the real estate industry, he said.