On Thursday, December 26, China revised upward the size of its economy by 2.7%.
The Asian country’s authorities said that the mentioned change would not have a significant impact on the dynamic of gross domestic product (GDP) increase in the current year.
Chinese policymakers have pledged to expand and strengthen stimulus measures aimed at intensifying economic growth in 2025. It is worth noting that during the current year, the GDP of the Asian country faced what can be described as a gradual fading of the momentum of increase.
Political support in the second half of 2024 has set the Chinese economic system, which is the second largest in the world, on track for target growth of about 5%. The mentioned measures contributed to the intensification of economic activity in the Asian country. At the same time, China’s prospects are obviously not positive. Beijing is currently facing the threat of higher tariffs on imported goods that could be imposed by Washington. Donald Trump, who won the United States presidential election last month and will return to the White House in January, has repeatedly stated his intentions to do so. It is worth noting that the tariff increase will have painful consequences for Beijing. Currently, for the Chinese economic system, external shipments of products are actually the main driving force for growth. For the Asian country, exports are a source of positive indicators during the protracted crisis in the real estate sector, sluggish domestic consumer activity, and falling investor confidence. Potentially, Beijing can reduce the scale of the negative consequences of the expected tariff increase from Washington. At the same time, China will not be able to completely avoid the impact of the relevant factor. It is worth noting that many economists warn that an increase in tariffs may provoke negative consequences for the economic system of the United States. According to them, the implementation of the relevant decision may lead to an accelerated growth in inflation, which Washington has been fighting over the past two years and has already made progress in these efforts.
In 2023, China’s GDP rose by 3.4 trillion yuan, to 129.4 trillion yuan ($17.73 trillion). This was announced by Kang Yi, the head of the National Bureau of Statistics of the Asian country, at a press conference, while releasing the fifth national economic census. He did not explain the reasons for the revision of the dynamic of GDP in 2023. At the same time, it was noted that the bureau would publish more detailed information on this issue on its website within a few days.
Kang Yi stated that China’s economic system has stood the test of numerous internal and external risks over the past five years and maintained a generally stable growth tendency.
In previous five-year economic censuses, Beijing revised up the size of the economy for 2018 by 2.1% and for 2013 by 3.4%.
The fifth economic census, conducted over the past five years, takes into account the situation in the Asian country that developed during the coronavirus pandemic. Kang Yi stated that the mentioned pandemic has had a significant impact on the Chinese economy. It is also worth noting that the coronavirus as a whole has become a shock factor for the whole world. In the economic aspect of the mentioned situation, one of the most painful consequences has been the disruption of the global supply chain, of which China is one of the most important links. The pandemic has also paralyzed many processes in the manufacturing sector and the business environment. This situation was observed both in the regional dimension and at the global level.
Kang Yi stated that profound and complex changes have taken place in the international environment since the previous economic census. It is possible to assume with a non-minimum degree of probability that in this case, it implies, among other things, a consistent increase in the escalation of tension in the space of geopolitical relations. The condition of cooperation between world capitals is on a trajectory of continued deterioration. It is obvious that this situation has a negative impact on the economy, for which periods of political turbulence and tension at the global level are a series of trials that destroy many development platforms. One of the most characteristic forms of manifestation of the current geopolitical situation is the relationship between the United States and China. The interaction between Beijing and Washington is on a downward trajectory, which carries the risk of crossing a kind of point of no return, beyond which a fundamental degradation of cooperation begins. The United States is expanding restrictions on the export of advanced chips and equipment for manufacturing microcircuits of the corresponding category to China. As part of the retaliatory measures, the Asian country banned the export of several minerals to the United States. The current geopolitical tensions threaten the global segmentation of the global economy, implying the unification of certain groups of countries into financial and industrial alliances. In the case of such a scenario, the most active cooperation will be carried out within the alliances, while collaboration in the external direction will leave much to be desired. At the same time, this is a theoretical probability, not a practical inevitability.
Lin Tao, the bureau’s deputy head, said that the 2023 revision of GDP will not have a significant impact on the growth rate of this indicator in the current year.
It is worth noting that on Thursday, the World Bank raised its forecast for China’s economic growth in 2024 and 2025. At the same time, the experts of this financial institution once again called on the head of the People’s Republic of China, Xi Jinping, to pursue deep reforms to address lagging confidence and structural problems. The World Bank currently expects the Asian country’s economic growth to be 4.5% next year. The previous version of this forecast provided a 4.1% increase in the mentioned indicator. In this case, there is a reflection of the economic stimulus measures that Beijing has imposed since September and an increase in export activity.
The World Bank also revised upward its forecast for the current year. The financial institution expects China’s economic growth in 2024 to be recorded at 4.9%. This indicator is 0.1% higher than the reading contained in the previous version of the forecast. At the same time, Beijing’s corresponding target is about 5%. In the first nine months of the current year, China’s economic system showed growth of 4.8%.
The multilateral lender drew attention to the pledges by Xi Jinping to improve support for social welfare and consumption, and to implement fiscal and tax reforms. According to the experts of the financial institution, Beijing should do more to strengthen the confidence of households and businesses.
The lender adheres to the view that conventional stimulus measures are not enough to revive the growth of the Chinese economy. In the relevant context, experts of the financial institution note the need for deeper reforms in the areas of education, healthcare, social welfare protections, pensions, and the hukou household registration system.
The World Bank also noted that the upward dynamic of the Asian country’s GDP has slowed this year amid weak domestic demand and deep deflationary pressures, following a three-year downturn in the property market that hammered household wealth.
Moreover, a financial institution, warns that in China, more than 500 million people could potentially fall out of the middle class in just a generation after rising out of poverty. At the same time, the World Bank noted Beijing’s positive result, which is that over the past 40 years, 800 million people have left the financial territory of poverty. During this period, the share of the low-income population decreased from 62.3% to 17%.
Kang Yi stated that the economic census will provide important data to help formulate tasks for China’s 15th five-year plan from 2026 to 2030 and help achieve its 2035 goals.
Xi Jinping’s concept, called Chinese-style modernization, provides for doubling the size of the Asian country’s economy by 2035 compared to the 2020 indicator. Government economists estimate that achieving this goal is possible with an average annual increase in GDP of 4.7%. Many analysts outside the Asian country characterize this goal as overly ambitious.
This month, Chinese leaders pledged to increase the budget deficit, issue more debt, and loosen monetary policy to support economic growth in anticipation of increased trade tensions with the United States.
The media also published information about Beijing’s intention to raise the budget deficit to 4% of GDP. It is worth noting that this indicator is the highest in the entire history of observations.
The results of the economic census showed that the number of business entities in the secondary and tertiary industries at the end of 2023 rose 52.7% from the end of 2018, but growth of employment lagged, at 11.9%. There was also mentioned a severe property crisis hobbles a macroeconomical rebound, employees of property developers fell 27% to 2.71 million by the end of last year.
Tertiary industries range from retail to transportation, catering, accommodation, finance, and property. Secondary industries include mining, manufacturing, construction, and utilities, for example.
