China in 2024

In 2024, China’s economic landscape is poised for a notable rebound, even amidst challenges like the downturn in the property sector. A pivotal force in this resurgence is the growing services sector, which is reclaiming its position as a linchpin of China’s growth story.

Post the Covid-19 pandemic, the services domain is witnessing renewed vigour, emerging as a primary growth driver for the world’s second-largest economy. Service consumption, alongside robust investment, is carving a new economic pathway, reflecting a strategic shift in China’s growth model.

Notably, recent data underscores this narrative. The National Bureau of Statistics highlights a 19.5 per cent year-on-year surge in services’ retail sales until November 2023, eclipsing product retail sales’ 7.2 per cent growth. Further accentuating this trend, investments in high-tech services escalated by 10.6 percent during the same period, dwarfing the 2.9 per cent growth in fixed-asset investments.

As per the IMF’s latest World Economic Outlook, the world growth rate is anticipated to decelerate to 2.9 per cent. This deceleration is a ripple effect from waning domestic consumption in the West. The year 2023 witnessed a surge in consumption, buoyed by robust household savings, elevated employment rates, and a post-pandemic resurgence in consumption appetites. However, these pillars of growth are showing signs of waning strength in the developed economies.

Emerging markets and developing economies (EMDEs), however, present a glimmer of resilience. Now, EMDEs are pivoting inward, emphasizing local development and citizen welfare. Such a shift, championed by China, resonates with a historical trajectory where nations, during their ascendant phases, prioritize infrastructural and societal investments – two catalysts of domestic consumption.

For China, this evolution is reminiscent of its growth saga – a testament to the strategic intent of seeking sustainable prosperity amidst global flux. China’s recent central economic work conference, held in Beijing, underscored a commitment to fostering a symbiotic relationship between consumption and investment.

At the conference, a clear directive emerged: invigorate consumption and amplify productive investment, fostering a symbiotic relationship between the two. Emphasizing the need to stimulate consumption and bolster productive investments, the conference set the tone for steady economic growth in the coming years.

Buoyed by an ongoing economic resurgence, heightened consumer confidence, and robust policy backing, China stands poised for consistent economic expansion in 2024.

Between 2020 and 2022, China grappled with a volatile mix of unpredictable health crises and surging commodity prices, straining household balance sheets. Yet, a silver lining emerged in 2022-2023.

Household financial health displayed a commendable recovery, with the savings debt ratio rebounding from a precarious 1.47 to a more stable 1.70 by November 2023. This fiscal recalibration augments China’s consumption potential, hinting at a robust 2024.

Recent retail data underscores this optimism. In November 2023 alone, retail sales of consumer goods in China touched 4.25 trillion yuan, marking a 10.1 per cent year-on-year ascent. Cumulatively, from January to November, retail figures stood impressively at 42.8 trillion yuan, a 7.2 per cent surge from the preceding year, underlining a robust recovery.

With fiscal foundations strengthening, China’s economic landscape stands poised for a year of revitalized domestic consumption. Similarly, manufacturing investment, another important element of China’s growth narrative, saw a commendable uptick of 6.3 per cent in the initial 11 months of 2023. Similarly, infrastructure investment expanded by 5.8 per cent year-on-year, underlining sustained developmental momentum. While the real estate realm experienced a downturn with a negative growth rate of 9.5 per cent, recent policy recalibrations hint at a forthcoming rejuvenation.

Projections suggest that China’s real-estate sector, having weathered a two-year slump from 2022-2023, is poised for elevated, quality-centric trajectories in 2024. Collectively, these trends portend a year of stability, if not incremental advancement, for China’s investment landscape in the imminent future.

A notable shift in the last two decades has propelled China from labour-intensive and resource-focused exports to the forerunner of high-skill and technology-intensive manufacturing. Anticipated to surpass the five million mark in 2023, China is on track to claim the mantle of the world’s leading auto exporter, emblematic of a remarkable 60 per cent annual growth.

The emergence of electric cars, solar cells, and li-ion batteries – christened as China’s ‘new three’ exports – signals a departure from conventional categories like clothing and household appliances. In the wake of China’s property market undergoing a recalibration after two decades of robust growth, policymakers have identified new economic drivers.

In a strategic pivot, China is channelling investments from real estate towards cutting-edge technologies. Leading the charge in sectors like new energy vehicles, artificial intelligence and 5G, China is displaying its commitment to future-forward industries. As the real-estate sector recedes in China, redirected credit is invigorating industrial innovation to ensure sustained momentum in production and ground-breaking advancements.

China has consistently directed its focus towards clean and renewable energies over the past several years. Investments in solar panels, wind turbines, nuclear-power generators, batteries, and green e-vehicle manufacturing have become paramount.

Leveraging its mature and intricate supply chains, these emerging industries are poised to sustain China’s economic growth until 2030. Notably, over 46 per cent of the state grid’s annual electricity now originates from new energy farms and plants. China’s expansive electric vehicle (EV) assembly lines anticipate an estimated 8.4 million EV sales this year, providing the country an unparalleled edge in global competition.

Initially perceived as a pathway for sustainable transportation due to low carbon emissions and high energy efficiency, the green sector is now poised to compensate for the slowdown induced by the housing market correction.

In charting its trajectory towards accelerated modernization, China’s policymakers are pivoting towards high-tech innovations as the linchpin of its next phase. Emphasizing the imperative of technological evolution, there is a concerted push to elevate both the industrial and service sectors. This entails cultivating avant-garde business models fortified by ground-breaking technologies – be it digital exploration, artificial intelligence, or pervasive automation.

Breakthroughs in autonomous driving and generative AI by Chinese tech corporations are poised for expansive integration. China’s longstanding prowess in manufacturing – spanning digital devices, satellites, and high-speed locomotives – will witness sustained amplification.

Through this continued amalgamation of innovation and industry, China is well set to be more than just a global manufacturing centre but a forge for the technological revolutions of tomorrow.

The writer is a freelance contributor.