ADB: Three key drivers drive China’s stable economic growth

The Asian Development Bank recently released the “Asian Development Outlook 2024 (April Edition)” report predicting that China’s gross domestic product (GDP) growth rate will be 4.8% and 4.5% in 2024 and 2025 respectively.

The report shows that continued recovery in household consumption, efficient and powerful policy support, and technological development with obvious advantages play a key role in driving China’s economic recovery. Despite factors such as weak external demand and intensifying trade tensions, China’s economy can still maintain healthy and stable growth.

A big market has great power, and consumption recovery is the fundamental driving force for economic growth. The report points out that as the labor market improves and residents’ income increases, residents’ consumption will continue to recover and will boost the economic recovery in 2024. Among them, the job opportunities created by the construction and service industries will continue to benefit low- and medium-skilled workers, especially migrant workers. Improvements in employment will also bring about a corresponding increase in consumption power.

The report shows that as global environmental uncertainty and instability intensify, economic growth needs to rely on domestic demand to maintain upward momentum. As the income level of the Chinese people increases, the consumption of goods and services is likely to play an increasing role in driving GDP growth and long-term sustainable economic development.

ADB economists said that consumption plays an important role in China’s high-quality development. Jin Youxin, a senior economist at the ADB Representative Office in China, said that China’s economic growth is currently shifting from investment-driven to consumption-driven. Keiko Hagiwara, Director of the Economic Planning and Strategic Research Department of the ADB Representative Office in China, said that new productivity includes not only high-tech industries, but also high value-added service industries, such as finance, medical care, education, etc. The high value-added industries in these industries are It is achieved through consumption.

The super resilience brought by the ultra-large domestic market has always been the biggest source of confidence for the Chinese economy. Whether it is weak external demand caused by the sluggish recovery of developed countries or the impact of geopolitical situations on free trade, they cannot change the fundamentals of China’s sustained and stable economy.

The supportive policies that the Chinese government has successively introduced are also a strong guarantee for economic growth. The report pointed out that China’s economic growth will be driven by continued fiscal support. In 2024, China will continue to implement supportive fiscal policies and monetary policy will remain loose. The report believes that China’s fiscal stimulus is quite effective, and government spending has indeed led to positive growth in output. According to estimates, for every 1% increase in government spending, economic output will increase by 0.6% to 1%. At the same time, the report also pointed out that in 2024, China plans to arrange 3.9 trillion yuan in local government special bonds and issue 1 trillion yuan in ultra-long-term special government bonds, which will bring more benefits to economic growth.

The report also points out that there is room for further tapping into the efficiency of government spending. In this regard, Jin Youxin said in an interview with a reporter from the Economic Daily that improving the efficiency of government fiscal policy is of great significance to creating new quality productivity. In China, fiscal policy is often reflected through industrial policy, and through more precise design, it can achieve more prominent effects. Take the electric vehicle manufacturing industry as an example. Currently, there are more than 100 electric vehicle manufacturers in China, many of which are also producing traditional fuel vehicles. If we can help relevant companies upgrade their fuel vehicle production lines and provide corresponding employee skills training, it will help further expand the advantages of electric vehicle production. Industry-oriented support like this is the key to China’s policy spending improving efficiency.

China’s extremely large economic scale determines that the government must play an important and key role in correcting market failures. Therefore, strong governments at all levels are an important guarantee for China’s economic development to maintain steady progress.

High technology has high energy, and high technology is the driving force of economic growth. The report pointed out that factors such as the slowdown in economic growth in developed economies and geopolitical tensions have put greater pressure on the export of Chinese goods. However, in comparison, high-tech industries will still perform well. In terms of exports, the export of new industry products such as electric vehicles, batteries and renewable energy is the highlight; in terms of investment, foreign direct investment in high-tech industries will maintain a strong growth trend. Jin Youxin said that China has obvious advantages in attracting international investment in the high-tech industry. Its high-quality labor force, sufficient capital, and friendly policies are all very attractive to international investment in the high-tech field.

The report also pointed out that in 2024, China’s policy support for specific industries will promote the growth of the supply side such as high-tech manufacturing, and is expected to support technology industries such as semiconductors, high-tech equipment, and artificial intelligence, as well as support for electric vehicles, batteries, and renewable energy. Demand for low-carbon technologies such as renewable energy will continue through 2024. Government expenditure has a greater impact on the high-tech industry, that is, investment in high-tech can more effectively drive long-term economic growth.