SFC Outlook 2024｜China's economic outlook: Growth will be stronger in 2024

南方财经全媒体记者 李依农 上海报道

With China's sustained growth, the performance of the world's leading economy is closely watched worldwide. Over the past few decades, China has undergone remarkable transformation and development. Meanwhile, China's cooperative relationships with other countries are strengthening, exerting profound impacts on the global economic landscape. This collection features insights from experts in the international economic arena, discussing the current situation and prospects of the Chinese economy from various perspectives.

Chinese economy in 2024 will look a lot like 2023

Thomas J. Sargent: Chinese economy in 2024 will look a lot like 2023. That's what any of my friends who are economists will know what I'm doing. There's a really good statistical model of GDP growth. It's called a geometric random walk with growth, continuing to grow about the same rate. You'll be shocked. It's hard to beat that prediction.

Witnessing remarkable journey of China's development

AnilSooklal:IvisitedChinaforthepastthreedecades,many,manytimes.IhavemanyfriendsinChina,andmanyfriendsinSouthAfricaofChineseorigin.AndItellthemthatwhenIfirstwenttoBeijing,thereweremorebicyclesontheroadthancars.Buttoday,Chinaisdevelopedsodramatically,todayyouhavethelargestnetworkofroads,ofspeedtrains,yourinfrastructure,yourindustries.Youareleadertodayintechnology,youaresecondlargesteconomy.AndI'veseenthecitiesofChinadevelopandbecomemajorglobalcitiesthatnotonlyrivalsbuthasbetterinfrastructurethanthebestcitiesinNorthAmericaandEuropetoday.

Chinahasbecomealeaderintheworldineverysectorofhumanendeavor.AndI'vebeenveryprivilegedtowitnesstheriseofChina,tobepartofthisjourney,andtoseeChinabecomethismajorpower.NowChinabeingpowerfulisnotonlygoodforChina,isgoodforthedevelopingworld.Itshowsuswhatispossible,thatthetemplateofdevelopmentthatChinahasemployedtoliftitspeopleoutandtobecomealeadingnationoftheworldispossibleforallofus.

Chinese economy bounce in consumption

BrianCoulton:SoontheChina'sstory,whatwesawwiththepandemicrestrictionsthatweresortoftightenedagainin2022,thatreallyweighedheavilyonconsumption.Itwassomethingthatwasconstrainingwhatwecallcontact-intensiveconsumption.Sotheconsumptionmeansthatyouhavetobeclosetootherpeople.Sogoingtothecinema,goingtoarestaurant,orgoingtoabusyshoppingmall,allthosethingswereconstrainedheavilybythepandemic.

Whenthoserestrictionswereremoved,thereweresomeinitialreluctancebecausepeoplewereobviouslywithhealthconcerns.Theremovalofrestrictionsledtoabounceinconsumptiononthosecontact-intensiveservices.Itwasexactlythesamepatternthatwesawin2021and2022intheWesterneconomieswhentheyfinallyremovedthepandemicrestrictions.ThatwaswhatdrovethenormalizationinChina.

Optimistic about China's economic growth in 2024

Hoe Ee Khor: We are quite positive about China. We are relatively optimistic. If we compare our forecasts with the analyst forecasts, I think we are on the high end, because we are expecting China to grow by 5.3%, slightly higher than last year. But most of the analysts are expecting growth of below 5%. I think the average is maybe between 4.5% to about 4.8%.

We are optimistic, and the reason we are optimistic is because we still see China has not fully recovered. Last year was not a very good year for China, even though it grew by 5.2%, because of the headwind from exports and also because we see that domestic spending has not fully recovered.

This year we expect China’s economy to do better because the headwind from the real estate sector is going to be smaller. And maybe even better than this year if the real estate sector is able to recover slightly.

And the other sectors are doing well, manufacturing is doing relatively well. If you look at manufacturing, investment is quite strong. And I think I mentioned earlier that retail spending is also picking up. We see that in the indicators.

For all these reasons, we think that this year, the economy could be stronger, growth will be stronger than last year. Of course, along the way, there could be other shocks that happen, but we are optimistic that the Chinese economy will not be as weak as some of the other estimates that we are seeing.

Economic growth between China and ASEAN is reciprocally beneficial

Hoe Ee Khor: China is the biggest trading partner for ASEAN and ASEAN has become the biggest trading partner for China during the pandemic. They are each other's biggest trading partner now. And so, strong growth in China would be good for the region, and similarly, strong growth in ASEAN is good for China. But China is also the biggest trading partner for 150 countries around the world. It's a very important economy for everyone.

The main thing about China now is that because China is at the stage of development where it's beginning to outsource production, as it is moving up the value chain. So, it is beginning to outsource labor-intensive sectors like garments, and some parts of manufacturing as well. If you look at Vietnam, Cambodia, and now Malaysia, they are attracting investment from China in the manufacturing sector. So the Chinese industries are beginning to move production to Vietnam, to Cambodia, and other ASEAN countries.

Besides that, China is probably the most advanced in terms of electric vehicles, batteries, solar, wind, power, renewable energy. And because of climate change, a lot of countries are now moving away from fossil fuels to renewable energy. So many of them are trying to attract investment into the new EV industries, from everywhere. I mean, not just from China, but China is one of the biggest investors now in EVs.

So Indonesia, because it has natural resources in nickel,is a very attractive destination for the Chinese to set up production because they can leverage the nickel deposits there.

But also, Thailand and Malaysia because they already have an auto industry and they want to shift from fossil fuel to electric vehicles. So they are also trying to attract the Chinese electric manufacturers to move their production to those countries. And besides that, they're also trying to attract investment in solar energy, in wind power energy, and others.

So there's a lot of investment flows between China and the rest of the region. Which is very important because in the old days, China's investment in most countries used to be just in natural resources, mostly copper, iron ore, or coal. But now there's also investment in manufacturing and services. Alibaba, Tencent, now they are big players in the global stage. And they are also investing abroad because they also want to diversify the market to other parts of the world.

Innovation is crucial to sustaining growth

Campbell Harvey：As an academic, I study economic growth globally. It's part of what I do. So, I do think that there is a runway for China to have. The 5 % is great. The U.S. would love to have 5 %. Europe, they would be celebrating with 5 % growth, when they're kind of stuck at 1 % of growth. I do think that there are some head winds for China. It's always good to recognize what they are, so that you can develop like a plan. So, one head wind we've already talked about is sort of deglobalization. I do think that certain policies could be put in place to mitigate the extent of that. I think that's something that can be worked on.

There are structural factors for China. And this is not just a China factor, but other countries experience it, too. And that is the rate of population growth. China made a decision in terms of the one child policy that is going to affect the medium-term prospects. And also just fertility has gone down. China is not the only country. You can see that happens in the US also, but the US kind of replaces the decrease in fertility with immigration. And other countries kind of do the same thing. I think that also is a headwind. And again, that's something that policy makers should be thinking of.

There are other issues. Obviously, if there are geopolitical risks that impacts the willingness of people to invest in any country. So, if the country becomes riskier, that just means that the hurdle of investing in that country goes up. Something riskier, you require a higher rate of return. Again, some of this risk can be mitigated by policy makers.

The last thing that I'll mention and hopefully it's obvious. And I tell this story to all of the audiences across the world that innovation is really important. Innovation is just like the driver of growth. The U.S. has done a really good job. So why is it that they are out ahead so far on all these innovations? So, this is, again, not just advice for China, but advice for any country, that you need to have in place a policy that encourages innovation, and to let people discover stuff. And most of those discoveries will turn out to be failures, it'll go nowhere, but you're looking for the big ones. And the big ones really drive economic growth. So, I think that's really important every house or every country develops those capabilities to encourage innovation. It is the best way to grow.

It's interesting that China and the U.S. face a very similar sort of demographic problem that with an aging population and government programs that are supposed to support the aging population, the money is not obvious that is there. So this is why innovation is really important that China needs to maintain that 5 % growth rate. And the U.S. needs to substantially increase their growth rate. The US social security will run out in 2033. So we've got like 9 years. And that is a huge liability. And we need to grow. So the U.S. needs to grow. China needs to grow.

（市场有风险，投资需谨慎。本节目嘉宾意见仅代表本人观点。）

策划：于晓娜

监制：施诗

责任编辑：施诗

记者：李依农 周蕊

制作：李群

新媒体统筹：丁青云 曾婷芳 赖禧 曾昭发

海外运营监制: 黄燕淑

海外运营内容统筹: 黄子豪

海外运营编辑：庄欢 吴婉婕 龙李华 张伟韬

出品：南方财经全媒体集团