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Let misjudgements be, China is still on a growth track

By Liang Jin | China Daily | Updated: 2024-04-15 09:42

The skyline of Beijing. [Photo/VCG]

The Chinese economy withstood pressures both at home and overseas to grow 5.2 percent year-on-year in 2023. The additional economic girth exceeded 6 trillion yuan ($830 billion), equivalent to the yearly GDP of a medium-sized economy.

The international environment was complex and challenging in 2023, and domestic tasks for reform, development and stability were also arduous and heavy. Pessimistic views of the Chinese economy and those calling for so-called de-risking gained stronger voices, which exaggerated the problems of the Chinese economy's post-pandemic recovery and ignored its strong resilience, great potential and clear vitality.

Some people have blindly applied international precedents to China's reality and focus more on "quantity" than on "quality" of economic development. This has led to many misjudgments about China's economy.

Miscalculation 1: China's post-pandemic economic recovery is slowing.

Last year witnessed a good start for the Chinese economy in the first quarter. However, affected by factors such as holdover effects of the pandemic, some economic indicators fell slightly in the second quarter. Some foreign institutions therefore predicted that China's economic recovery would be weak and could not achieve the GDP growth target of around 5 percent for 2023.

Shortly after the release of economic data for the first half of the year, the central leadership made the judgment that economic recovery would feature a wave-by-wave development process with twists and turns, and China's economy enjoyed great resilience and potential for long-term growth.

In the face of the downward pressure on the economy, many government departments took quick action to launch a combination of policy measures. In the third quarter of 2023, many sectors and multiple economic indicators showed positive changes, and international institutions raised their forecast for China's economic growth for full-year 2023.

Data from the National Bureau of Statistics clearly showed the trajectory of China's economic recovery last year. The year-on-year GDP growth rates in the four quarters were 4.5 percent, 6.3 percent, 4.9 percent and 5.2 percent, respectively.

The 5.2 percent annual GDP growth last year was not only higher than the estimated global growth of about 3 percent, but also made China one of the largest driving forces for global economic growth.

Miscalculation 2: Foreign capital no longer favors the Chinese market.

At the beginning of last year, some Western politicians advocated for "de-risking", "decoupling" and "China plus N" strategies, which worsened geopolitical risks in economic globalization and disrupted market layouts of some multinational companies.

In 2023, the actual use of foreign capital in China fell from a year ago, and pessimists took the opportunity to hype theories like "a large number of foreign investors are withdrawing from China", and "the Chinese market is not investable", ignoring the fact of a record high comparison base in 2022 and a gloomy global foreign investment sentiment.

In fact, foreign companies that know the Chinese market intimately are well aware of its irreplaceability. Since spring 2023, executives from many multinational corporations have made visits to China.

The sixth China International Import Expo welcomed the largest and highest-level delegation from the United States in the event's history, and the first China International Supply Chain Expo attracted more than 500 companies and institutions from 55 countries and regions. Last year, China established 48,078 new foreign-invested enterprises, increasing 36.2 percent year-on-year.

In the past five years, the rate of return on foreign direct investment in China has been relatively high relative to other investment destinations. Choosing China means embracing opportunities, and investing in China means investing in the future. Against the backdrop of multiple uncertainties facing the global economy, many foreign companies are casting "votes of confidence" in China's economy through their actions.

Miscalculation 3: China's economy is mired in deflation.

The year-on-year growth rate of China's consumer price index is an important indicator of inflation levels. With the low-level and even negative CPI growth rates since the second quarter, pessimists quickly labeled China's economy as "deflationary" and even speculated that China might follow the steps of Japan's long-time deflation.

As a matter of fact, the low-level or negative CPI growth rates were due to structural and temporal factors. Energy prices surged in 2022 and then fell in 2023. Pork prices rose rapidly in 2022, while the decrease in pork prices was significant in 2023, driving the index down.

"We don't expect to see a general deflation trend in China," said Gita Gopinath, first deputy managing director of the International Monetary Fund, at a news conference in November.

Miscalculation 4: The prospects of China's economic transformation are bleak.

With significant changes in market supply and demand dynamics, the real estate sector has entered a period of correction and transformation, which has caused disruptions to China's economic operations.

Such a challenge has been depicted by pessimists as a "crisis" that will lead China's economy into a recession.

In fact, different regions and government departments are adjusting and optimizing real estate policies in a timely fashion.

Over the long term, demand for new housing from new urban residents and the urgent demand for improved housing from a growing number of Chinese households will form an important driving force for the real estate market.

Although the property sector's contribution to economic growth has weakened, development of new growth engines such as the services sector and high-tech manufacturing driving the high-quality development of the Chinese economy, is accelerating. In 2023, the value added of the services sector accounted for 54.6 percent of GDP, up 1.2 percentage points from that of the previous year. Investment in high-tech industries grew by 10.3 percent.

Currently, China's middle-income group exceeds 400 million people, and is expected to reach 800 million in the next decade or so, forming strong momentum for consumption upgrades.

Only by expanding the horizons of views and conducting a panoramic observation can one have an objective and comprehensive understanding of the current situation and long-term trends of the Chinese economy.

The writer is a researcher at the Xinhua Institute, the think tank of Xinhua News Agency.

The views don't necessarily reflect those of China Daily.

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