Top economist predicts upswing for Chinese economy

China’s economic outlook is set to improve this year, with the country’s growth target of around 5% for 2024 well within reach, according to a renowned economist.

Huang Yiping, dean of Peking University’s National School of Development, told the China Daily website that China’s economy is relatively stable, with better-than-expected indicators in the first two months.

He said: “There is hope that the economy may continue to improve, given that the government will expand its fiscal spending and provide more support to economic growth in the coming months.

“The US economy looks like it is experiencing a soft landing, which should be positive for our external economic environment and exports.”

Huang said China’s economy “has shown notable signs of recovery since the beginning of this year, with factory output and investment growth accelerating, as well as easing deflationary pressure, despite persisting challenges from both structural issues as well as insufficient demand”.

He said: “Overall consumption is relatively stable, but it’s not particularly strong. For instance, if you look at the mobile payment numbers during the Chinese New Year, the overall number is rising, but the price per order is still very soft or very weak. And people are still worrying about the consumption downgrade.”

He said relatively weaker consumption indicates that the scarring effect of the Covid-19 pandemic, to some extent, has yet to fade.

Huang called for more efforts to boost economic recovery and stabilize employment, which will bolster consumer sentiment and increase incomes for households.

He added that the government is allocating more resources to support social welfare, pension and healthcare systems, trying to revitalize rural areas, as well as supporting households in replacing their consumer durables with new ones. “These subsidies, spending, and so on would be positive for consumption,” he said.

According to the annual Government Work Report, China has set its GDP growth target at around 5% for 2024, similar to last year’s target. Huang said while this year’s target may be more difficult than last year’s because of the higher base in 2023, it is achievable given the upward trend in economic recovery, more fiscal stimulus and monetary easing.

Looking ahead, Huang highlighted the significance of delivering fast total factor productivity, or TFP, which is a measure of productive efficiency, measuring how much output can be produced from a certain amount of aggregate inputs.

“Growth really means innovation will have to become more important… The only way to sustain the current economic growth rate is that the efficiency and productivity will need to go higher,” Huang added.

 

Services activity continues to grow

New figures show that China’s services activity growth accelerated in March, with new business growing at the quickest pace in three months.

The Caixin/S&P Global services purchasing managers’ index (PMI) reached 52.7 from 52.5 in February, above the 50-mark for the 15th consecutive month. A figure of below 50 represents a contraction in the market, while a figure above 50 represents growth.

Caixin Insight Group said that, thanks to improving underlying demand and efforts to boost new orders, the pace of new business growth was the fastest since December 2023.

That also pushed up business confidence as the sub-index of future activity increased for the first time in three months amid hopes that new product lines, expansion plans and rises in client budgets will help boost sales.

However, employment levels contracted for a second successive month in March, though the rate of job losses eased from February.

According to respondents, resignations among staff and redundancies to improve productivity resulted in the fall in payroll numbers.

Taken together with the Caixin manufacturing PMI, the Caixin/S&P’s composite PMI rose to 52.7 last month, up from 52.5 in February. It is the highest figure since May 2023.

“Growth in supply and demand in both the manufacturing and services sectors accelerated slightly, with improved exports and sustained market optimism,” said Wang Zhe, economist at Caixin Insight Group.

But Wang noted employment in both sectors continued to contract, while input and output prices remaining low, indicating that “sluggish demand persisted”.