In contrast to some economists, China has not encountered excessive infrastructure investment.In fact, the country still has a lot of infrastructure gaps to be completed, especially in key areas such as medical care, pension, education, scientific research, urban development, and transportation.Its public facilities lag behind many developed countries, and even behind some developing economies.
At the beginning of 2024, the Chinese economy faced an increasingly pessimistic forecast.Although the Chinese government is still optimistic, the International Monetary Fund expects the country's gross domestic product (GDP) growth rate from 5.4%in 2023 to 4.6%.At the same time, after the price of various stocks has fallen to the lowest level in the past five years, the decline in China's stock market will continue.
However, China's economic prospects are more bright than seemingly.Although the government has not released its own outlook for 2024, most Chinese economists expect it to set a 5%annual growth goal (compiled: Chinese Prime Minister Li Qiang has stated in the National People's Congress on March 5 that he will seek"About 5%" economic growth).Considering that China is better than expected in 2023, I think that 5%of growth is both necessary and feasible.
Consumption is the main driving force of China's economic growth in 2023, contributed 82.5%of GDP growth.Although the Chinese government has not announced the final consumption data, we can use the total retail sales of social consumer goods as a useful indicator.Last year, such sales increased by 7.2%, reflecting that consumer expenditure recovered after the decline in 2022.However, it seems unlikely to maintain this growth momentum. Many Chinese economists also expect that consumption in 2024 will slow down.
Under the drag of weak global demand, China's net export growth in 2023 has increased by 1.3%.In view of the unlikely improvement of global economic prospects in 2024, we have reason to expect that the contribution of net exports to China's GDP growth will be minimal.Therefore, to achieve a 5%GDP growth target, investment growth must be greatly improved.However, the amount of investment in China's fixed assets, which has formed a calculation indicator, only increased by only 3%in 2023, and 5.1%in 2022.
Fixed asset investment includes three main categories: manufacturing, real estate and infrastructure.In the field of manufacturing, several industries have achieved significant growth in 2023. Investment in electrical machinery, equipment, instruments, automotive and high -tech investment has soared by 34.6%, 21.5%, 17.9%, and 10.5%, respectively.However, the overall growth of manufacturing investment was only 6.3%, while 9.1%in 2022.At the same time, real estate investment fell by 9.1%in 2023. Although there are currently some signs of improvement, it is expected to decline this year.
If the manufacturing investment fails to increase significantly, the recovery of real estate investment is still lacking. According to some rough calculations of existing and some inconsistent data, infrastructure investment must increase by more than 10%to make up for the decline in consumer growth.In view of the increase in infrastructure investment in 2023, only 5.8%, the achievement of double -digit growth is facing major challenges.
Nevertheless, the Chinese economy is in a period of quasi -pass, and the consumer price index (CPI) and the producer price index (PPI) are in a negative range, which allows policy makers to launchMajor fiscal stimulus measures to boost economic growth, at least in the short term.
Considering these shrinkage pressures, the People's Bank of China should relax the monetary policy and set the inflation target at 3%to 4%.At the same time, after recognizing the endogenousness of currency supply, it should pay more attention to interest rates as short -term macroeconomic tools, rather than guiding financial resources to specific industries and enterprises.
When the demand is weak, infrastructure investment is still the most effective tool for the government to stimulate the economy.If the government encounters difficulties in issuing sovereign bonds as infrastructure investment and financing, the People's Bank of China can implement its own version of quantitative easing and buy government bonds in the open market.
In contrast to some economists, China has not encountered excessive infrastructure investment.In fact, the country still has a lot of infrastructure gaps to be completed, especially in key areas such as medical care, pension, education, scientific research, urban development, and transportation.Its public facilities lag behind many developed countries, and even behind some developing economies.
Major Policies
It is certain that infrastructure investment often has no profit and cannot generate a lot of cash flow. This is why such investment should directly provide funds through government budgets.However, in order to ensure that China's infrastructure demand can be met, policy makers must invest in high -efficiency and high -quality projects.
China's decision to issue a government bond of RMB 1 trillion (about S $ 190.4 billion) in 2023, marking a major change in policies.The proportion of allowing budget deficits to GDP has increased from 3%to 3.8%, and the Chinese government issues that the annual budget deficit and public debt may no longer be limited to the 3%and 60%signals equivalent to GDP (refer to the EU's horseSterrich Treaty).
Although the government's primary task in 2024 is to promote economic growth and revitalize economic confidence, China must also work hard to cope with the continuous liquidity crisis of the local government's high debt and the real estate industry. If the latter is not resolved,It may be upgraded to a comprehensive debt crisis.
Fortunately, the Chinese government has the financial resources required to face these challenges.By implementing various types of expansion finance and monetary policy, and implementing meaningful reforms, China is fully capable of reversing a 10 -year economic slowdown trend in 2024, and has maintained a strong growth in the next few years.
The author is the former chairman of the Chinese World Economic Society, former director of the Institute of World Economic and Political Sciences of the Chinese Academy of Social Sciences, and a member of the Monetary Policy Committee of the People's Bank of China (2004 to 2006)
English Original Title: China ’s Economic Prospects Are Brighter than they Appear
All rights reserved: Project syndicate, 2024.
