China's economy has experienced a faster growth rate in the October-December quarter, enabling the Chinese government to achieve its target of approximately 5% annual growth for 2023. Despite uneven trade data and an ongoing economic recovery, official figures released on Wednesday reveal that China's economy grew by 5.2% in 2023, surpassing the government's set target. However, this growth fell slightly short of analysts' expectations, who predicted a growth rate of 5.3%.
The remarkable growth seen in 2023 can be attributed to the previous year's GDP of only 3%. The COVID-19 pandemic and subsequent nationwide lockdowns heavily impacted China's economy, resulting in a significant slowdown.
In the fourth quarter, China's gross domestic product also grew by 5.2% compared to the same period in the previous year. However, the economy experienced a slight slowdown, with a quarterly rise of 1% in Q4, compared to the expansion of 1.3% witnessed in the July-September quarter.
Officials from China's National Bureau of Statistics attributed this growth to various measures, including strengthened macro regulation, increased efforts to bolster domestic demand, structural optimization, enhanced confidence, and risk prevention.
Key sectors of the economy showed positive performance as well. Industrial output, which measures manufacturing, mining, and utilities activity, grew by 4.6% in 2023 compared to the previous year. Additionally, retail sales of consumer goods experienced growth of 7.2%.
Furthermore, fixed-asset investment, comprising spending on factory equipment, construction, and other infrastructure projects to drive growth, exhibited a 3% YoY increase in 2023.
In another positive development, China has resumed reporting data on its youth unemployment rate after a six-month suspension. Using a new methodology that excludes students from the jobless rate, the youth unemployment rate for individuals aged between 16 and 24 stood at 14.9%. This marks an improvement from the record-high youth jobless rate of 21.3% in June when the previous methodology was used.
China's Economic Recovery Shows Uneven Progress
Officials have introduced a new methodology to measure employment, excluding current students. This change is expected to provide a more accurate reflection of employment among young people entering society.
However, indicators suggest that China's recovery is uneven. December's trade data revealed a slight growth in exports for the second consecutive month, along with a slight increase in imports. In contrast, consumer prices have fallen for three consecutive months due to persistent deflationary pressures.
Julian Evans-Pritchard from Capital Economics expressed concern about China's recovery, stating that it remains shaky. Although policy easing may offer some short-term boost, Evans-Pritchard believes that a renewed slowdown is likely to occur later this year. He further noted that achieving the same pace of expansion in 2024 will be significantly more challenging for China.
Chinese Premier Li Qiang spoke at the World Economic Forum, highlighting that China achieved its economic target without resorting to massive stimulus. Li emphasized that China has strong and solid fundamentals for long-term development, and despite setbacks, the positive trend in the economy will persist.
Over the past decade, the ruling Communist Party has deliberately shifted away from government-led infrastructure projects, opting for a more consumer-driven approach seen in other major economies. This transition aims to establish a more sustainable path to affluence. However, the ongoing disruptions from the pandemic and the crackdown on excessive borrowing by property developers have further exposed underlying weaknesses in China's growth trajectory.