Government policy in 2024 to be geared to China’s industrial sector

China’s economy is set to enjoy steady growth in 2024 as domestic demand recovers, aided by macroeconomic policy support and the ongoing upgrading of the country’s industrial sector.

That’s the view of some of China’s leading economists, who say consumption will remain the primary driver for growth this year, while the investment outlook is expected to improve, countering lingering pressures on exports.

Wang Yiming, vice-chairman of the China Center for International Economic Exchanges, said consumer spending is poised to further expand this year, building on the post-pandemic rebound in 2023. Wang said in the first three quarters of last year consumption accounted for 83.2% of the nation’s economic growth.

Supporting the continued recovery in consumer spending would be the acceleration of new forms of consumption, including in the digital economy, green industries, healthcare and smart homes, said Wang, who is also a member of the Monetary Policy Committee of the People’s Bank of China, the country’s central bank.

He said traditional areas of consumption such as vehicles and electronics are also expected to see a resurgence as a stabilizing economy boosts people’s incomes and expectations.

“I believe there is scope for intensifying fiscal policy support,” Wang said, adding that the central government may increase debt levels and implement structural tax cuts.

Zhang Xiaoqiang, executive vice-chairman of the China Center for International Economic Exchanges, said efforts to promote a modern industrial system “would help form a virtuous cycle between consumption and investment, while the country’s increasingly diverse export markets and emerging export advantages in new energy sectors will help offset lukewarm global demand.”

“China has the capacity to achieve economic growth around 5% in 2024 while maintaining the momentum of high-quality development,” said Zhang, who is also a former deputy head of the National Development and Reform Commission.

The latest government figures show that China’s economy bounced back last year, expanding by 5.2% in the first three quarters; however, supply recovered faster than demand, making insufficient demand a weak link of the economy.

The country’s official purchasing managers’ index for the manufacturing sector fell to 49 in December from 49.4 in November, indicating that factory activity has contracted for the third consecutive month, the National Bureau of Statistics said on Sunday. A score above 50 represents growth in the sector, while one under 50 represents a contraction.

Lan Zongmin, a researcher at the Development Research Center of the State Council, said the Chinese economy is likely to see a more balanced recovery between supply and demand this year as policymakers attach more emphasis to bolstering demand, with the deepening of industrial upgrading to further anchor investment growth.

Lan said: “Infrastructure investment in the areas of technological advances and carbon reduction will likely speed up, and manufacturers’ equipment upgrade and growing capacity in emerging industries would bolster investment in the sector”, adding that investment activity in the real estate sector is projected to stabilize.

The National Bureau of Statistics (NBS) figures also show China’s retail sales, a gauge of consumption, rose by 10.1% year-on-year in November, while investment lagged behind as total fixed-asset investment expanded by 2.9% year-on-year in the first 11 months of 2023 due to a slump in real estate development.

 

More support for the private sector

Meanwhile, the Chinese government has announced measures in six areas to enhance support for the country’s growing private economy.

Zheng Shanjie, head of the National Development and Reform Commission, China’s top economic planner, said that “more pragmatic measures will be taken in six areas”.

The six areas are:

• accelerating the legislative process of the law on the promotion of the private economy;
• improving multi-level communications and listening to the voices of private enterprises;
• strengthening the analysis of the private economy’s development;
• attracting more private capital to major national engineering projects, such as railways, nuclear power, energy, water facilities and ecological and environmental protection;
• promulgating good practices and cases for mutual learning; and
• improving work mechanisms with a view to better serving the private economy’s development.

“A series of policies to promote the development of the private economy was introduced in 2023,” Zheng said. “With the implementation of these policies and measures, the development of the private economy has shown a general trend of steady progress and steady improvement.”