Farmers prepare for spring farming in Yuyao, Zhejiang Province, on March 18 (XINHUA)
Better-than-expected, recovery, hard-won results… these are the key words that constitute China's economic performance in the first quarter (Q1) of 2023, laying a foundation for achieving the country's growth target for this year—set at around 5 percent.
"China's national economy is off to a solid start." This is how Fu Linghui, spokesperson of the National Bureau of Statistics (NBS), opened a press conference on China's Q1 economic performance on April 18. The Chinese economy grew 4.5 percent year on year in the first three months; on a quarterly basis, it improved 2.2 percent. Some economists and organizations had previously projected a 4-percent growth on an annual basis.
"Amid a complex and severe international environment, a slowdown of the world economy and mounting instability and uncertainty, this was no easy achievement," Fu explained.
Vehicles ready for export are lined up at a port in Taicang, Jiangsu Province, on March 13 (XINHUA)
Endless traffic jams in large cities, restaurants buzzing with patrons inside and queuing outside, eager travelers puzzled as to why they can't get their hands on a plane or train ticket… the country's hustle and bustle is back.
The flow of people has brought back consumption, which was the number one contributor to Q1 rebound among China's troika of growth drivers, namely investment, consumption and exports, contributing 66.6 percent to the GDP gains, according to the NBS.
Retail sales of consumer goods went up 5.8 percent year on year in Q1, reversing a decline of 2.7 percent in the fourth quarter (Q4) of last year. The accommodation and food and beverage sector surged 13.6 percent year on year in Q1, in sharp contrast to the 5.8-percent decline it saw in Q4 of 2022. The numbers speak volumes about a robust consumption.
"Since the adjustment of pandemic response measures, the service sector sped up its recovery, and consumption sectors with large customer flows, such as hospitality and tourism, resurged, in turn stimulating related employment and income," Guo Liyan, an economist with the Chinese Academy of Macroeconomic Research, said at the Guoshi Forum on the Chinese economy, hosted by China News Service in Beijing on April 14.
Foreign trade expanded 4.8 percent, reversing a decline of 0.8 percent in the first two months of this year. "The foreign trade rebound has sent a positive signal to turn around previously rather poor market expectations," Huo Jianguo, Vice President of the China Society for World Trade Organization Studies and former President of Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said.
Exports registered an 8.4-percent growth year on year in Q1, which is "quite impressive," given growth in the first two months was slow, according to Huo. China's export growth accelerated just 0.9 percent in January and February combined, according to the General Administration of Customs of China.
"It's worth noting that the structure of export products has seen an upgrade," Huo said. Overseas shipments of electric vehicles, lithium-ion batteries and photovoltaic cells, also known as the three new export growth drivers, saw a year-on-year increase of 66.9 percent in Q1.
Huo acknowledged the role emerging markets play in promoting foreign trade growth, but did caution that if demand from the U.S. and European markets continued its downtrend, it might possibly drag down the sector.
In Q1, the country's fixed assets investment went up 5.1 percent year on year, the same as last year's annual average. While investment in infrastructure construction, manufacturing and hi-tech industries improved 8.8, 7 and 16 percent, respectively, that in the private sector rose just 0.6 percent.
"Consumption and foreign trade performed better than expected," Zong Liang, chief researcher at Bank of China, said at the forum. "But investment was weaker than anticipated." In the coming months, the focus should shift to shoring up private investment, he suggested.
Diners pack a restaurant in Kunming, Yunnan Province, on January 11 (XINHUA)
A better future
But one tough challenge to tackle remains that of insufficient domestic demand.
To expand domestic demand, Guo said it's important to support business entities, stabilize employment, encourage consumption and realize a dynamic production chain. She particularly emphasized the importance of raising household income in boosting consumer confidence.
A highlight of China's Q1 economic performance lies in the income increase of rural residents, Bai Jingming, a researcher at the Chinese Academy of Fiscal Sciences, said. After allowing for inflation, the 4.8-percent year-on-year improvement surpassed that of city dwellers and exceeded the GDP growth, indicating great consumption potential.
Guo stressed more supply-side efforts could provide more high-quality products to meet upgraded consumer demands, adding there is much room for safer, greener and more customized consumption.
Foreign trade is estimated to grow 2-2.7 percent year on year in 2023, Huo predicted. He said China will embrace more opportunities by giving full play to the role of the Regional Comprehensive Economic Partnership, a free trade agreement between the 10 member states of the Association of Southeast Asian Nations (ASEAN) and five partners—Australia, China, Japan, New Zealand and the Republic of Korea.
Huo noted enterprises should equip themselves with market expansion capabilities. "Our products are becoming more competitive globally, but Chinese enterprises need to catch up with their advanced foreign counterparts in areas such as how to approach new customers and acquire orders," he said.
Other priorities Huo proposed included China ramping up efforts to create a fair business environment and lending policy support to more private companies, cultivating an innovation incentive mechanism for boosting high-quality development, and broadening international cooperation and opening up.
Zong advised moving forward the internationalization of the Chinese yuan, which he considers a "responsible currency" that could serve as a new option for international trade settlements.
Recently, the yuan's internationalization has seen further progress as the Brazilian branch of the Industrial and Commercial Bank of China, the country's largest commercial lender, conducted its first cross-border yuan settlement transaction and Bangladesh and Russia agreed to use the Chinese currency to settle payments for a nuclear power plant Russia is building in the South Asian country.
Visitors enjoy a sea of rapeseed flowers at a farm in Chongzhou, Sichuan Province, on March 5 (XINHUA)
"China this year is going to contribute about one third of global growth. We calculated that 1 percent more growth in China translates into 0.3 percent more growth for the economies that are connected to China, which will provide more opportunities to other countries," Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), said at a press conference on April 13.
On April 11, the IMF predicted a 2.8-percent growth for the world economy this year, 0.1 percentage point lower than its January forecast, while it projected China's economy to grow 5.2 percent.
The World Bank raised its global growth forecast for 2023 to 2 percent on April 10 from 1.7 percent in January, due to China's recovery, with growth in the country expected to reach 5.1 percent this year compared to a previous estimate of 4.3 percent.
Globally speaking, high inflation has plagued the U.S. and many European countries. The U.S. Federal Reserve's monetary tightening, a liquidity crisis facing some Western banks, accompanied by geopolitical risks, unilateralism and protectionism, have together intensified the global economy's instability.
"Against the backdrop of global uncertainty, China's economic recovery will inject impetus into the world's economic resurgence," Hong Yong, an associate researcher with the E-Commerce Institute under the Chinese Academy of International Trade and Economic Cooperation, told Beijing Review.
As the world's second largest economy, China's faster growth will generate more growth impetus for the world. By, for example, continuously updating its industrial structure, China has showcased advantages in its 5G, new-energy vehicle and artificial intelligence sectors, injecting new blood into the global economy, Hong explained.
"The COVID-19 pandemic and the Russia-Ukraine conflict have had a profound impact on the global economy. Broad prospects for cooperation exist in the financial, energy, technology and international relations sectors," Deng Weiqiang, a researcher with the Doctoral Think Tank in Macao Special Administrative Region, told Beijing Review.
(Print Edition: And They're Off!)
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