Where is China's economy heading for?
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The release of China's first-quarter economic indicators has garnered significant attention worldwide, given the country's status as the world's second-largest economy.
Here's a breakdown of the discussion among officials, experts, observers and business leaders focusing on promising signs, fundamental challenges and key risks, to find out where the economy is heading for and its economic impact on the global stage.
⭐Key Facts:
China's GDP expanded 5.3 percent from one year earlier in the first three months of the year, accelerating from 5.2 percent in the previous quarter and above the annual growth target of around 5 percent set for this year, data from the National Bureau of Statistics (NBS) showed.
The PMI, a critical gauge of manufacturing and services sector health, reported improvements in March, with PMI for the manufacturing sector moving back above the mark of 50 separating expansion from contraction for the first time since September.
China's foreign trade expanded 5 percent year on year in yuan terms in the first quarter, setting new records in both scale and growth rate, official data showed.
⭐Official:
China's economic and social development in Q1 achieved a "stable start, a smooth take-off, and a positive beginning." said Li Hui, an official with China’s National Development and Reform Commission (NDRC) at the fourth episode of the China Economic Roundtable, an all-media talk platform hosted by Xinhua News Agency,
NBS spokesperson Wang Guanhua also said at the roundtable that China's economic growth has maintained a leading position among the world's major economies, and remained an important growth engine and stabilizer for the global economy. The country's stable development injects stability to a world of uncertainties."
"Although there is a continuous increase in positive factors, the domestic effective demand is insufficient, and social expectations are weak," said Liu Sushe, deputy head of the NDRC, adding that the economy still faces risks and challenges.
A breakdown of the Q1 data showed the growth is not only quantitative, but also qualitative. Its high-tech manufacturing sector registered a growth of 7.5 percent in Q1 output, accelerating by 2.6 percentage points from the previous quarter.
Investment into aviation, spacecraft and equipment manufacturing surged 42.7 percent in the January-March period, while the production of service robots and new energy vehicles saw substantial increases of 26.7 percent and 29.2 percent, respectively.
Structurally, the country's export portfolio demonstrated strength in the machinery and electronics sector, as well as labor-intensive products, signaling the continued international competitiveness of these goods. Imports of bulk commodities and consumer goods have expanded steadily, indicating a healthy and growing domestic demand.
⭐Economist:
Goldman Sachs and Citigroup both recently released reports indicating that China's economy started the year 2024 on a positive note. They predict that the Chinese government's GDP growth target of around 5 percent can be achieved and have raised their forecasts for China's GDP growth for the entire year of 2024.
Yu Xiangrong, Citigroup China chief economist, analyzed in the research report that a new round of policies aimed at stabilizing growth is being accelerated. In terms of supporting policies, the Chinese government is promoting a large-scale update of equipment and a trade-in program for consumer goods.
Yu stated that in addition to this, the Chinese government has sent a stronger signal of optimizing the business environment and advancing opening-up.
Goldman Sachs revised its forecast for China's GDP growth rate for the year 2024 from 4.8 percent to 5.0 percent, while Citigroup has made a similar upward adjustment from 4.6 percent to 5.0 percent.
Yuekai Securities noted that China's economy has continued to show signs of recovery, underpinned by improvements in supply and demand. The business expectations index within the purchasing managers' index (PMI) data pointed upwards, reflecting a gradual restoration of confidence among microeconomic entities.
The demand structure revealed that service consumption, high-end manufacturing investment, and infrastructure investment were the main drivers, said Yuekai Securities in a research note.
⭐Observer:
Wall Street Journal
A column by Wall Street Journal said after a rough 2023 and early 2024, the first read on China’s economy in March points to a tentative rebound heading into the second quarter.
PMI in March has moved back above the 50-point level since September and the services sector index has notched its strongest reading since June. The good news is the improvement is probably real: Exports and the global electronics sector seem to be on the mend again, and looser Chinese credit markets are helping support investment.
But China's job market and property sector still look weak. Growth of around 5% for 2024, the official target, still looks like a big reach.
The Conference Board
The Conference Board, a global think tank and business membership organization, has just released its monthly updates on the Chinese economy entitled. "A Reasonably Strong Start Into 2024, But Growth Target Will Be Hard to Reach".
Investment Trends - Fiscal support issued late last year bumped up investment growth in early 2024. However, real estate investment will continue to be a major drag on growth in 2024.
Consumption Trends - Retail sales grew up notably in the first two months from December. Measures suggested at the Two Sessions to boost consumption – most notably old-for-new programs – may help to raise consumption at the margins, but are unlikely to have a substantial or lasting effect without healthy growth in income and employment.
Trade Trends - Export growth improved in the first two months as suggested by trade figures and the manufacturing PMI’s new export orders sub-index. But we still expect the global economy to slow, which will continue to weigh on Chinese exports.
U.S. Bank Wealth Management
An article by analysts at the U.S. Bank Wealth Management said China’s economy continues to face fundamental challenges, consumer demand is weak, and the property market is hurting, and China’s spillover effects are negatively impacting emerging markets.
China appears to face continuing fundamental weakness on two major fronts. "The property market is still upside down," says Eric Freedman, chief investment officer at U.S. Bank Wealth Management. "Also, if you look at core demand from a consumer standpoint, it’s just not there."
⭐Company:
To leverage innovation momentum, Chinese companies in both traditional and high-tech industries have been making strides.
"Traditional industries don't represent low-end industries and backward productive forces," said Dai Guanwen, head of the development department at the technical center of the HBIS Group Shisteel, a steel bar production enterprise.
Dai said that the company has implemented a technique to eliminate high-emission processes in steel production, such as sintering and coking. It also uses clean energy sources to minimize carbon emissions.
TCL China Star Optoelectronics Technology (TCL CSOT) owns an automated and smart production line housed in a space equivalent to 12 football fields.
"The production line is able to carry out fully automated production 24/7. We could even turn off all the lights, and it will still carry out production in the dark," said Zhang Feng, senior vice president of the TCL CSOT.
In the next step, Zhang said the company is planning to fully harness the advantages of green and digitalized manufacturing and continue strengthening the weak links of the industrial chain.
China has underscored the urgent need for enterprises to achieve breakthroughs in sci-tech innovations and has made arrangements to expedite the process.
"As long as we proceed on the innovation trajectory, I believe the made-in-China products will have a greater presence in overseas markets," said You Hongtao, chairman of Chongqing Pharscin Pharmaceutical Co., Ltd.
China ranked 12th in the 2023 Global Innovation Index, and became the country with the largest number of top 100 sci-tech innovation clusters in the world for the first time, according to the World Intellectual Property Organization.
Compiled by Qiao H.