While the Chinese government has yet to release the annual GDP growth rate for 2023, many economists, including Ning Jizhe, former director of the National Bureau of Statistics, estimate a reading of around 5.2 percent, slightly higher than the 5.0 percent target set by the government.
Nevertheless, a pessimistic outlook for China’s economy in 2024 holds sway, with many analysts predicting a growth rate of 4.4 to 5 percent in 2024, a further slowdown from 2023. But there are many reasons to believe that China’s economic growth will pick up in 2024.
First, China’s economy will shift from post-pandemic recovery to normal development in 2024. There are already signs that consumer confidence has risen in recent months. In November 2023, total retail sales of consumer goods increased by 10.1 percent year-on-year, accelerating by 2.5 percentage points compared to the previous month and by 3.3 percent compared to the first three quarters. In the meantime, residents’ disposable income increased by 5.9 percent in the same period, which is 0.7 percentage points higher than the overall economic growth rate. This will further boost consumer confidence.
Second, with a low inflation rate and low central government debt level, there is still ample room for China to adopt more proactive fiscal and monetary policies to boost the economy. As the US Fed is expected to lower interest rates, it will alleviate pressure on China’s capital outflows and the yuan’s exchange rate against the US dollar, further opening up space for a more expansive macroeconomic policy. There were already positive signs by late 2023. In November 2023, foreign holdings of domestic bonds increased by US$33 billion, the second highest in history. At the end of the year, the yuan-dollar exchange rate had also rebounded by 3.5 percent from its 2023 low point.
Third, as the US Fed concludes its interest rate hike cycle, European and American companies may choose to replenish their inventories, which would lead to increasing external demand for China’s export sector. Despite the decline in China’s exports and foreign direct investment, China’s position in global supply chains remains robust. In November, China’s total exports denominated in US dollars marked a 0.5 percent growth year-on-year, the first monthly growth since May, indicating that the export sector is on the recovery track.
Finally, China’s focus on promoting technological innovation continues to provide new opportunities and new sources of economic growth. In the first 11 months of 2023, China’s investment in high-tech industries increased by 10.5 percent, exceeding the overall growth rate of fixed asset investment by 7.6 percentage points. Among them, the production of solar cells, service robots and integrated circuit products increased by 44.5, 33.3 and 27.9 percent year-on-year. China replaced Japan as the world’s largest auto exporter in 2023 for the first time in history. China also consolidated its position as the world’s leading shipbuilder in 2023, with its shipbuilding output accounting for over half of the world’s total while making breakthroughs in high-end ship models such as LNG carriers and cruise liners.
As consumption, investment, government spending and the export sector are all expected to improve in 2024, China’s economic growth will remain on a positive trajectory.
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