The Strength of the Chinese Economy in 2024 and its Significance for the Future World

“China’s role in the world economy is substantial. It accounts for around 10% of world trade and stock market capitalization, around 18% of GDP (at market exchange rates), around 16% of world oil demand, and over a quarter of world broad money,” according to Oxford Economics. The robust growth in China is based on a cocktail of state-driven investment, supply-side stimulus, and a boost in “green” manufacturing, said its lead economist Sean Metcalfe. The continued government stimulus concentrated in green equipment and high-tech manufacturing is not only part of the economy’s shift away from low-value mass manufacturing, as Mr. Metcalfe pointed out, but also a strong support for the future of the world economy, in my humble opinion.

Looking at the statistics, in the first quarter of 2024, China’s GDP increased by 5.3%, an increase of 1.6% year-on-year from the previous quarter. This growth rate is mainly driven by industrial recovery and service industry, as was stated by Deputy Director of the National Bureau of Statistics Sheng Laiyun. The value-added of the industry increased by 6% year-on-year, and the retail sales increased by 10%. Thus, the contribution rate of the service industry to economic growth reached 55.7%, while that of industrial and service industries to the growth exceeded 90%.

However, “from the perspective of recovery, consumption recovery is not as good as production. Small and medium-sized enterprises recovery are not as good as large enterprises. There are obvious imbalances in the economic recovery,” Mr. Sheng added. This is indeed a challenge China faces.

But high-tech industry investment has become the breadwinner in China, which has big potential effects on the world economy. In the first quarter of 2024, the investment in high-tech industries increased by 11.4% year-on-year. Concerning high-tech manufacturing, the investment in the aircraft and equipment manufacturing increased by 42.7% while computer and office equipment manufacturing investment increased by 11.8%. The high-tech service industries including the investment of e-commerce services and that of information service industry are also eye-catching with the growth rate of 24.6% and of 16.9%. respectively. (Source: Xinhua Agency)

Thanks to the complete industrial system and strong production capacity, Chinese high-tech and high value-added products are still very popular overseas. In the first quarter of 2024, electromechanical products including computers, cars, and ships exported a total of 3.39 trillion yuan, an increase of 6.8% year-on-year, accounting for 59.2% of the total export value. The high-end equipment exports in the central region increased by 42.6%, indicating that the competitive advantage of “Made in China” competitive advantage continues to consolidate.

The industrial recovery is related to the promotion of some recent policies by the government who is promoting a new round of large-scaled equipment renewal and consumer goods. This has enhanced corporate confidence to a certain extent. Worth mentioning is an important driving role of the new kinetic energy industries, too. “The industrial recovery will continue and be further consolidated, especially to increase support for the real economy,” said. Mr. Sheng.

Throwing an overall look on the total imports and exports, one sees the increase by 5.0% year-on-year. “It is the first time of the same period when the number exceeded 10 trillion yuan. The growth rate reached a new high since 6 quarters,” according to Wang Lingjun, Deputy Director of the General Administration of Customs.

The significance of China’s economy for the future world

Against the backdrop of today’s restless world with battles and conflicts around, plus climate change, China’s stable economic growth is in contrast with the dramatic slow-down of world economy – especially in Europe where the growth was a mere 0.4% in 2023. The old continent is suffering from a variety of abrupt and unknown destructive factors, yet economic “decoupling” is being a popular word, unfortunately.

The result is a certain drawback or even stagnation of the economic course being steered by today’s technological frontlines that are shaping the future. At the recent EU summit held from 17. to 18. of April, Enrico Letta, once served as the Italian Prime Minister, drew a catastrophic picture of the European internal market. He said he traveled all over Europe to get an idea of ​​the situation on site and experienced the most blatant paradox. It is impossible to travel with high-speed trains between the European capitals. “We have not even managed to combine the three most important European capitals Brussels, Strasbourg and Luxembourg,” he said. The environmentally friendly means of transport remains a necessary expansion plan on paper.

“This is a profound contradiction that symbolizes the problems of the internal market,” Mr. Letta said. The problem is not to be solved by closing the border and decoupling the economy. As for decoupling, the situation between China and the USA has been serious, with the technological standards affecting the areas of microchips, cloud use and the telecommunications standard 5G. These are primarily all future-oriented data-driven digital technologies, as was well-observed by Andreas Glunz. “After the further wave of customs conflicts, decoupling is rather another attempt by the United States to slow down China’s economic power. And again, Europe and especially German companies are getting into this vortex. But unlike tariffs, established technological standards cannot be abolished so quickly. Therefore, the decoupling also has a much greater potential for danger for the global economy than customs wars. If this path is advanced, there will be only losers, which threatens enormous economic damage for a long term,” Mr. Glunz wrote for KPMG last year
(„Four Questions and Answers to the Technological Decoupling“).

The world has been flat for long, but the politics around the world are initiating Tsunami. China’s economy deserves attention of the world, since it is still firmly promoting the sustainable global supply chain and international mutual cooperation, injecting motivation and confidence which the world economy desperately needs.

According to the data released by the World Bank, the average contribution rate of China to the world economic growth from 2013-2021 reached 38.6%, which exceeded the total contribution rate of the G7 countries. Compared to 2022, China’s economic growth in 2023 is more than 6 trillion-yuan, equivalent to the economic aggregate of a medium-sized country for a whole year.

The future of the world economy is tightly connected with innovative new technologies in industry and business. China has been contributing to the growth of world economy in these fields, in quantity as well as in quality. As for the foreign investors, huge potentials are offered by the inland and rural areas in China. The generous spaces, rich resource endowments, outstanding innovation capabilities, well-established industrial systems, and the world-leading manufacturing capabilities are chances to be caught. At the same time, the market potential in China with its 400 million middle-class population should not be ignored. The number might double in the coming decade, which has a big meaning for the global demand, too.

Photo Source © Xinhua Agency

Vienna, May 6, 2024