China’s economy has shown strong growth in the fourth quarter of 2023, allowing the government to reach its target of approximately 5% annual growth for the year. Despite uneven trade data and an ongoing economic recovery, official figures released on Wednesday indicate that the Chinese economy expanded by 5.2% in 2023, surpassing the government’s goal.
This growth can be attributed, in part, to the slower GDP growth of just 3% in 2022, when the Chinese economy was significantly impacted by the COVID-19 pandemic and subsequent nationwide lockdowns.
Fourth Quarter Growth
In the fourth quarter of 2023, China’s gross domestic product also increased by 5.2% compared to the same period the previous year. However, the growth rate did decrease slightly from the third quarter, with a quarterly expansion of 1% compared to 1.3%.
Measures to Boost Recovery
The Chinese government has implemented various measures to stimulate economic recovery, including strengthened macro regulation and efforts to expand domestic demand, optimize structure, boost confidence, and mitigate risks. These initiatives have contributed to improvements in recovery momentum, supply and demand.
Key Indicators
Key indicators of China’s economic performance include a 4.6% rise in industrial output in 2023, which measures activity in the manufacturing, mining, and utilities sectors. Additionally, retail sales of consumer goods grew by 7.2%, demonstrating increased consumer confidence and spending.
Furthermore, fixed-asset investment, which includes spending on factory equipment, construction, and infrastructure projects, saw a 3% year-on-year increase in 2023.
Youth Unemployment Rate
China has also resumed releasing official data on its youth unemployment rate after a six-month suspension. Under a new methodology that excludes students from the calculation, the unemployment rate for individuals aged between 16 and 24 stood at 14.9%. This represents an improvement from the previous methodology, which reported a record-high youth jobless rate of 21.3% in June.
Officials state that the new methodology provides a more accurate reflection of the employment situation for “young people entering society.”
Overall, China’s economy has demonstrated resilience and robust growth, overcoming challenges posed by the pandemic and showing signs of a promising future.
China’s Uneven Recovery
Recent indicators are pointing to a largely uneven recovery for China. While trade data for December showed a slight growth in exports for a second consecutive month, as well as a slight increase in imports, consumer prices have fallen for a third consecutive month due to persistent deflationary pressures.
According to Julian Evans-Pritchard from Capital Economics, China’s recovery “clearly remains shaky.” Although there may be some short-term boost from policy easing, Evans-Pritchard believes that it will not prevent a renewed slowdown later this year. He also notes that achieving the same pace of expansion in 2024 will be “a lot more challenging” for China.
Despite these challenges, Chinese Premier Li Qiang stated at the World Economic Forum that China had achieved its economic target without resorting to “massive stimulus.” Li emphasized that China has “good and solid fundamentals” in its long-term development, and although there may be setbacks, the positive trend for the economy will not change.
Over the past decade, the ruling Communist Party has deliberately shifted away from relying on government-led investment in massive infrastructure projects, aiming to drive the economy more through consumer demand, similar to other major economies. The slowdown in growth reflects this effort to attain a more sustainable path to affluence. However, the disruptions caused by the pandemic and the crackdown on excessive borrowing by property developers have highlighted underlying weaknesses.
Foreign investment and talent are now experiencing an exodus from China, which has raised concerns for Xi Jinping. This departure of foreign involvement is leaving U.S. businesses operating in China confused and worried. Additionally, China’s youth job market is currently a nightmare, and it is significantly changing the face of the country. The overall impact of these issues has led to a reluctance among Chinese consumers to open their wallets, except when it comes to watching movies.
In summary, China’s recovery is facing significant challenges, but with its solid fundamentals and efforts towards a sustainable economic path, there is hope for a more stable future.
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