Western countries led by the U.S. have naturally assumed that China’s economy will continue its downward spiral since the recent defaults of several Chinese real estate giants. They estimate that China may even fall into long-term stagnation like Japan and faces difficulties to reach its growth target of 5% for 2023. However, the Chinese government is fully optimistic about achieving its growth target. Frankly speaking, apart from a sluggish real estate market, China’s economic recovery also failed to meet expectations in the first half of this year. The year-on-year growth rates of the first and second quarters were 4.5% and 6.3% respectively. GDP for the first half of this year grew by 5.5%. In order to avoid systemic risks in the housing market, China’s Ministry of Housing and Urban-Rural Development, National Administration of Financial Regulation and People’s Bank of China take joint efforts to save the housing market. Besides implementing a policy measure of preferential loans for first-home purchases and using a policy toolkit of “one city, one strategy,” China also rolls out robust support measures for the real estate sector, which is expected to effectively boost market confidence and serve to stimulate the housing market.
Moreover, China’s National Development and Reform Commission issued twenty measures to boost consumption at the end of July. The measures mainly cover six areas, including stabilizing bulk consumption, expanding service consumption, increasing rural consumption, broadening new models of consumption, improving consumption infrastructure and optimizing the consumption environment. The effect of the Mid-Autumn Festival and the National Day long holidays has obviously boosted per capital consumption and other indicators, and growth is expected to surpass the pre-pandemic level. The “Notice on Some Measures Concerning Releasing the Consumption Potential of Tourism and Promoting the High-Quality Development of the Tourism Industry” issued by China’s State Council further fosters consumption.
China’s September PMI, which was newly released by the National Statistics Bureau, stood at 50.2, an increase of 0.5 compared to the previous month. It marked the fourth consecutive monthly growth as well as the first return to the expansion zone over the past five months. The Non-Manufacturing Business Activity Index in the same month was 51.7, the first rebound in four months. These represent an accelerated overall expansion of enterprises’ manufacturing and business activities. In addition, profits of industrial enterprises above scale nationwide saw a year-on-year increase of 17.2% in August. Prices may hit a 14-month new high in September, which would eliminate the specter of stagnation. According to data released by the General Administration of Customs, China’s total goods imports and exports reached 3.74 trillion yuan in September, registering a new monthly high since the beginning of this year. Imports and exports for the first three quarters were 9.72 trillion, 10.29 trillion and 10.79 trillion yuan respectively. As the scale of trade volume increases, China is confident about realizing the goal of promoting stability and improving the quality of foreign trade throughout this year.
What is worth noticing is that China is heading toward a high-quality economy and carbon neutrality by 2060. The “three new products,” i.e., solar energy, lithium batteries and new-energy vehicles, have gradually become the major momentum supporting China’s exports. The exports of the “three new products” totaled 264.7 billion yuan in the first quarter, a year-on-year increase of 67%. China may transform itself from the largest importer of fossil fuels to the largest exporter of renewable energy technologies and equipment amid the continuation of the global green transition. China generated 2,700 terawatts of renewable energy in 2022, accounting for 31.6% of its electricity consumption and maintaining its leading position around the world. China has also become a global leader in the solar and optoelectronic industries. China, with its rapid development of new energy vehicles, replaced Japan as the world’s top auto exporter in the second quarter of this year. China also strengthens the development of a digital economy. Xi Jinping already emphasized the need to broaden and strengthen a digital economy and create new space for economic development at the 36th collective study session of the Politburo of the 18th CPC Central Committee in 2016. China has started a new engine for its economic growth.
China is currently transiting to a more stable, robust and high-quality model of economic growth. An economic slowdown is the inevitable pain in the process. The Chinese Premier Li Qiang said that China is expected to reach the growth target of around 5% set earlier this year and will continuously provide new and greater opportunities for the region and the world. A recent International Monetary Fund (IMF) report suggests that the Chinese economy has shown signs of stabilizing from the latest data. China will be able to accelerate its growth in the medium term and reach its 5% growth target this year if it continues the reform of its economic growth model and channels investment into boosting consumption spending. Other prestigious financial institutions, including Goldman Sachs, the Deutsche Bank, Morgan Stanley and ANZ, simultaneously raised their 2023 economic growth forecast for China from 5% to 5.4% in recent days.
（Wo-chiang Lee, Professor of the Department of Banking and Finance at Tamkang University ）
（Translated to English by Cindy Li）
