New policies set to lift China’s economy over next 12 months
China will experience a notable economic upswing in 2024, fuelled by recoveries in services consumption and investment, despite the slump in the property sector and its impact on domestic demand.
That’s the widely held view of a number of economists, who are urging the Chinese government to “promptly introduce policies that tap into the vitality of the services sector, such as further advancing the opening-up of the services sector, refining service supply and encouraging consumption of services”.
Their comments came as a new survey showed that China’s services activity in December expanded at the fastest pace in five months, indicating that economic recovery is gaining momentum.
The Caixin China General Services Purchasing Managers’ Index increased to 52.9 in December from 51.5 in November. A PMI reading of above 50 points to expansion, while one below that mark indicates contraction.
Caixin’s composite PMI, which includes both manufacturing and services activities, came in at 52.6 in December from 51.6 in the previous month, recording the highest level since May.
“The latest figures signal the continued economic recovery trend, especially with the services sector gradually regaining vitality after Covid-19 disruptions,” said Hong Yong, an associate research fellow at the Chinese Academy of International Trade and Economic Cooperation’s e-commerce research institute. “The services sector has become a crucial force bolstering the growth of the world’s second-largest economy.”
Expanding service consumption is an essential means of supporting economic growth, said Hong, adding that service consumption and investment are expected to become new growth engines.
Meanwhile, data from the National Bureau of Statistics (NBS) showed that retail sales of services in China grew by 19.5% year-on-year in the first 11 months of 2023, outpacing the 7.2% growth in retail sales of products during the same period. Investment in high-tech services jumped 10.6% in the first 11 months of last year.
Hong called for further steps to boost the development in services consumption and investment, including ramping up efforts for further opening-up of the services sector, improving service standards and enhancing service supply.
Wang Peng, an associate researcher at the Beijing Academy of Social Sciences, said growing domestic demand and stimulating consumption will be key priorities for this year.
“It is advisable for the government to take measures such as raising income levels, improving the consumption environment and strengthening the protection of consumer rights,” Wang said.
In December 2023, the Central Economic Work Conference called for efforts to stimulate consumption and expand investment to create a virtuous cycle of promotion between consumption and investment.
Speaking at the conference Bai Wenxi, vice-chairman of the China Enterprise Capital Union, said that China’s economy will likely register steady growth this year, given the continuing economic recovery trend, improved consumer sentiment and stronger policy support.
Foreign entities eye growth in China
Chinese government moves to relax requirements for overseas organisations wanting to do business in the country will encourage an influx of overseas investment, according to an official with the country’s Ministry of Commerce
Zhu Bing, director of the commerce ministry’s department of foreign investment administration, told the China Economic Roundtable hosted by Xinhua News Agency that the number of newly-founded foreign-invested firms across the country increased by 36.2% year on year in the first 11 months of 2023.
“In particular, investment from developed countries like the United Kingdom, France, the Netherlands, Switzerland and Australia increased significantly,” Zhu said.
In December 2023, China’s State Council issued a comprehensive plan to promote the high-level institutional opening-up of the China (Shanghai) Pilot Free Trade Zone (FTZ), aligning it with international economic and trade rules.
The plan contains some 80 measures covering seven areas, including initiatives to facilitate trade in goods and services, promote digital trade and enhance intellectual property rights protection, among others.
In July 2023, China has issued a 24-point guideline designed to improve conditions for foreign investment and attract more capital. “China’s institutional opening up has made foreign enterprises feel more reassured,” said Zhao Yugang, an official with the Shanghai Pilot FTZ management committee.
Zhao said that in order to boost its attraction to international investors, the Shanghai Pilot FTZ will continue to ease foreign investment access and create a fair competitive environment.
