After a solid start in Q1, China eyes strengthened economic recovery
Published: May 07, 2024 07:53 PM
An aerial view of Chengdu Hi-tech Industrial Development Zone in Chengdu, Southwest China's Sichuan Province Photo: VCG

An aerial view of Chengdu Hi-tech Industrial Development Zone in Chengdu, Southwest China's Sichuan Province Photo: VCG

After China's economy mounted an impressive start to the year, global attention has now shifted to what China plans to do to sustain the great momentum in the recovery of the world's second-largest economy for the rest of the year. 

During a meeting at the Xi Jinping Thought on Economy Study Center, which is affiliated with the National Development and Reform Commission (NDRC), the top economic planning agency, experts painted a bright picture for the economic recovery heading into the rest of the year, citing emerging positive trends across a wide range of areas such as consumer spending, industry, and regional development. 

Above all, experts said China's continuously strengthening policy measures are acting as a source of confidence in the continued recovery of the Chinese economy, which they said will help achieve annual development goals, even though the economy still faces challenges and risks. 

"Currently, positive factors are continuously increasing in the economic operation, but the economic recovery still faces several challenges," Li Hui, deputy director of the Department of National Economy of the NDRC, told reporters at the meeting on Monday. "At the same time, we must also see the favorable conditions for economic development, correctly understand that a good start and a solid recovery are the basic characteristics and trends of the current economic operation." 

Going forward, Li said that solid efforts must be taken to sustain the positive trend and maintain policy continuity to avoid relaxation, so as to effectively consolidate and enhance the positive trend of the economic recovery. 

Despite challenges and risks, China's economy rebounded strongly in the first quarter of the year. In the first three months of 2024, China's GDP grew by 5.3 percent year-on-year, beating market expectations and laying a solid foundation for the economy to achieve the pre-set goal of growing by around 5 percent for the whole year.

Beyond headline GDP data, China also saw strong recovery momentum across a range of sectors, including consumption and industrial profits. Retail sales, a main gauge of consumption, surged by 4.7 percent year-on-year in the first quarter, providing a main boost for the overall economic recovery, according to the National Bureau of Statistics (NBS).

"We believe that consumption has played a fundamental driving force for the good start of the economy and solid progress of high-quality development," Gu Yan, head of the Research Department I at the Xi Jinping Thought on Economy Study Center, said on Monday, noting that consumption contributed 73.7 percent of economic growth in the first quarter of the year. 

Another major boost for the economic recovery came from the industrial sector during the first quarter. Profits of China's major industrial firms increased 4.3 percent year-on-year over the three-month period, reversing a 2.3-percent decline registered in 2023, according to the NBS. Value-added industrial output, an important indicator, went up 6.1 percent year-on-year in the first quarter, NBS data showed.

Mao Kejun, head of the Research Department III at the Xi Jinping Thought on Economy Study Center, said that in the first quarter, the industrial sector has not only seen continuous expansion in scale, but also accelerated transition and upgrade.

"The resilience of industrial and supply chains has further strengthened, with integrated circuit output surging 40 percent year-on-year," Mao told reporters on Monday, noting China's complete, large-scale industrial system is a source of confidence in the country's long-term economic development. 

Looking ahead

While Chinese experts have highlighted the impressive economic recovery in the first quarter of the year, the main focus has been shifted to keeping up efforts to further consolidate the recovery momentum for the rest of the year. 

A meeting of the Political Bureau of the Communist Party of China Central Committee in April noted that the economy had secured a good start this year, while cautioning against challenges, such as insufficient demand, high operational pressure facing enterprises, and an external environment that is more complicated, grimmer and more uncertain.

Among others, the meeting stressed the need to assess the consistency of macro policy orientation, advance large-scale equipment renewals and trade-ins of consumer goods, introduce more consumption scenarios, promote people-centered new urbanization, and implement a new mechanism for cooperation between the government and private capital, while fully stimulating private investment.

Effectively implementing various macro policies to further consolidate economic growth has become a top priority for the rest of the year, according to experts. 

"We will make continuous efforts in effectively implementing macro policies, developing new quality productive forces in accordance with local conditions, unswervingly deepening reform and opening-up, continuing to prevent and resolve risks in key areas, solidly promoting green and low-carbon development, and effectively ensuring and improving people's livelihood, and promote high-quality completion of the overall economic and social development goals and tasks for the year," Li said. 

China has set a GDP growth target of around 5 percent for 2024, and many institutions and experts are increasingly confident that such a target will be achieved despite challenges, thanks to China's solid economic recovery and sufficient policy tools.

John Ross, a senior fellow at the Chongyang Institute for Financial Studies, said in an article published by the Global Times, that based on observations and research over the past 30 years related to China's economy, the country will be able to achieve its GDP growth target of around 5 percent, and will undoubtedly remain the main driver of global economic growth. 

Among the major economic drivers, consumer spending will remain the biggest source of growth and will likely further rebound throughout the rest of the year, experts said. 

"Looking at the full year, consumption is expected to continue to show a positive trend of recovery," Gu said, pointing to strong policy support and solid fundamentals.