In 2023, China will achieve 5The economic growth of 2% is expected to contribute more than 30% to the world economic growth, and high-quality development has been steadily promoted, and the main expected goals have been successfully achieved. The pace of economic recovery is characterized by wave-like development and zigzag progress. The continuous decline in prices reflects the lack of effective demand and other problems, and the policy of stabilizing growth will continue to exert force in the future.
Liao Zongkui.
The 2023 economy has come to a successful end. On January 17, the National Bureau of Statistics released the economic data for the whole year and the fourth quarter of 2023, and the preliminary calculation showed that the annual GDP was 1260582 billion yuan, an increase of 5 over the previous year on a constant** basis2%。By industry, the added value of the primary industry increased by 4 percent over the previous year1%；The added value of the secondary industry increased by 4 over the previous year7%；The added value of the tertiary industry increased by 5 percent over the previous year8%。Quarterly, GDP grew by 4% year-on-year in the first quarter5%, up 6 percent in the second quarter3%, up 49%, up 52%。
The overall economic recovery is improving, and GDP (unchanged**) in 2023 will increase by 5% year-on-year2%。The target of about 5% set at the beginning of the year has been successfully achieved. China's economy is expected to contribute more than 30% to world economic growth in 2023, making it the largest engine of world economic growth. From the perspective of GDP month-on-month growth, it shows a trend of high in the front, low in the middle, and stable in the back.
The economy in 2023 also showed many structural bright spots, reflecting the rich connotation of high-quality development: the unemployment rate continued to decline, and the growth rate of residents' income was faster than the economic growth rate, indicating that the sense of economic recovery has increased; New industries are growing rapidly, new business forms are continuing to improve, new models are being cultivated at an accelerated pace, the economic structure is constantly being optimized, and kinetic energy conversion is being upgraded; The service industry has recovered rapidly and has become the main engine of economic growth; The green and low-carbon transformation continues to deepen, and the development mode is further transformed.
The recovery has had its ups and downs
In 2023, the economy will achieve 5A 2% increase is not easy. As Kang Yi, director of the National Bureau of Statistics, pointed out at the press conference: "In 2023, the world economy will be in a downturn, the international landscape will evolve in a complex manner, geopolitical conflicts will occur frequently, and the external environment will be more complex, severe and uncertain. There are many cyclical and structural contradictions in China, and natural disasters occur frequently. In such a complex situation, it is even more commendable to achieve such development achievements. ”
Of course, the road to economic recovery will not be easy. In the face of the "scarring effect" in the post-epidemic era, the downturn of the real estate cycle, and the slowdown of the global economy, the economic recovery in 2023 is a process of wave-like development and zigzag progress.
Due to the interference of the base, the use of month-on-month data or two-year average year-on-year growth rate is a more accurate depiction of economic changes. The seasonally adjusted quarter-on-quarter GDP growth rate for the four quarters of 2023 is5% and 10%, showing a trend of high front, medium low and stable back.
In the first quarter of 2023, the economy got off to a good start, and after the epidemic eased greatly, the pent-up demand in the early stage was released in a concentrated manner in the short term, and consumption and investment showed a large upward rush, with a GDP growth rate of 21%, if the annualized rate is equivalent to 84% high growth. Real estate sales, which have been relatively sluggish before, also saw a "small spring", with new RMB loans reaching 10 in the first quarter6 trillion yuan, a year-on-year increase of 27%, and the growth rate of M2 and social finance also rebounded significantly. This series of recoveries has boosted market confidence, with the Shanghai Composite Index rising from around 2,900 points at the end of October 2022 to around 3,400 points at the beginning of May 2023.
In the second quarter, after a short period of "passion" release of demand, the heat returned to calm, and the momentum of economic growth declined. After the impact of the epidemic, the balance sheets of many households and enterprises have been damaged to a certain extent, and it takes a period of "healing" to "scar effect", which has led to a significant decline in investment and consumption growth. In addition, the global economic slowdown under the sharp interest rate hikes in Europe and the United States has also begun to drag down exports. The GDP growth rate in the second quarter was 06% with an annualized rate of 24% is significantly lower than the medium- and long-term potential economic growth level. The market is worried about the strength of the economic recovery, and the Shanghai Composite Index retreated from its highs to around 3,150 points in mid-June.
In the face of the slowdown in economic momentum, a series of macro policies were introduced in a timely manner in the third quarter, the issuance and use of special bonds were accelerated, the real estate stabilization policies were also rapidly introduced, and the central bank also implemented loose monetary policies such as RRR and interest rate cuts, and the economic growth momentum rebounded in the third quarter. GDP grew at a quarter-on-quarter rate of 15% and an annualized rate of 6%. During the intensive policy period, market confidence was boosted again, and by the end of July 2023, the Shanghai Composite Index returned to 3,300 points.
Affected by the low base, the year-on-year growth rate of all economic data in the fourth quarter increased, but the quarter-on-quarter momentum slowed down slightly. From October to December 2023, the manufacturing purchasing managers' index (PMI) is below the withering line of 50%, and the GDP growth rate in the fourth quarter is 1% quarter-on-quarter, with an annualized rate of about 4%, which is slower than that in the third quarter. The downturn in the real estate market continues to weigh on the economy, and the gradual shift of policy focus to 2024 has also led to a slight lack of policy implementation in the fourth quarter of 2023. Market sentiment turned pessimistic again, and the Shanghai Composite Index continued to decline, falling to 2,760 points in mid-January.
Shenwan Hongyuan** believes that the lower than expected economic performance in the fourth quarter of 2023 mainly comes from two aspects: (1) the growth rate of the secondary industry is lower than the monthly industrial added value data, or due to the greater weakening of production below designated size. Inventories dragged down GDP growth in the fourth quarter at -09 percentage points, which also verifies that industrial production below the scale is weak. (2) The growth rate of the tertiary industry in the production method and the weakening contribution of final consumption in the expenditure method reflect the weakening impact of service consumption. In addition to the weak consumption of goods, service consumption also tended to decline in the fourth quarter after the pulse in the third quarter, reflecting that the service consumption began to show signs of weakening after the fastest increase in the urban labor force participation rate has passed.
Judging from the "troika" of demand, consumption has significantly supported the economy, while the sluggish investment and exports have dragged down the economy to a certain extent. According to the National Bureau of Statistics, final consumption expenditure, gross capital formation, and net exports of goods and services will drive economic growth in 2023, respectively5、-0.6 percentage points, the contribution rate to economic growth is9%、-11.4%。Compared with 2022, the contribution of capital formation and net exports to economic growth has declined.
Structural highlights stand out
The economy in 2023 also showed many structural bright spots, reflecting the rich connotation of high-quality development.
The unemployment rate has continued to decline, and the growth rate of household income has been faster than the economic growth rate, indicating that the sense of economic recovery has increased. In December 2023, the national surveyed urban unemployment rate was 51%, down 04 percentage points. In 2023, the nominal and real growth rates of per capita disposable income of residents in the country will be 63% and 61%, both higher than the 46% and 52%。The support for people's livelihood on the policy side has been strengthened, and the transfer payments from social relief and subsidies, policy-based living subsidies, and cash policy-based subsidies to benefit farmers have increased by 103%。
The new momentum of the economy has been significantly strengthened. With the rapid growth of new industries, the continuous improvement of new business forms, the acceleration of the cultivation of new models, the continuous optimization of the economic structure, and the upgrading of kinetic energy conversion, the potential of economic development is expected to be further stimulated. Investment in high-tech industries will increase by 10 percent in 20233%, faster than the growth rate of all fixed asset investment. In 2023, the added value of the equipment manufacturing industry will increase by 68%, which is 2 faster than the growth rate of industries above designated size2 percentage points, solar cells, new energy vehicles, generator sets (power generation equipment) product output increased respectively5%；The sales of upgraded goods grew rapidly.
The service industry has recovered rapidly and has become the main engine of economic growth; In 2023, the added value of the service sector will account for 54 percent of GDP6%, contributing more than 60% to economic growth. In 2023, the added value of accommodation and catering, information transmission, software and information technology services will increase respectively9%。
The green and low-carbon transformation continues to deepen, and the development mode is further transformed. According to the National Bureau of Statistics, the proportion of non-fossil energy consumption in total energy consumption in 2023 increased by 02 percentage points. By the end of 2023, renewable energy will account for more than half of the installed power generation capacity, surpassing thermal power historically. The output of green and low-carbon products is also growing rapidly. In 2023, new energy vehicles will increase by 30 percent compared to the previous year3%, production and sales are the world's first; Exports of electric passenger vehicles increased by 671%。
Marginal changes in the economy
Judging from the marginal changes in the economy in December 2023, it shows the structural characteristics of strong production, stable consumption, and weak investment.
In December 2023, the added value of industrial enterprises above designated size increased by 68%, an increase of 02 percentage points. The month-on-month growth rate was 052%, down 035 percentage points. The average month-on-month increase from November to December was about 07%, significantly better than the level in the first three quarters. From the perspective of capacity utilization, which reflects the capacity utilization situation, in the four quarters of 2023, the industrial capacity utilization rate will be6% and 759%, showing a quarter-by-quarter upward trend.
In December 2023, the total retail sales of consumer goods increased by 7% year-on-year4%, down 27 percentage points, but that's more of a base effect. Month-on-month growth of 042%, an increase of 033 percentage points, the best month-on-month month since August.
Huajin** pointed out that the recovery of consumption presents three structural characteristics: first, the growth trend of mass consumption has cooled slightly after reaching the peak level of recovery in the third quarter of 2023, but it is still the main contributor to consumption growth in December**, and the catering industry, which is dominated by mass consumption, has maintained a stable and high driving role; Second, the consumption of goods above designated size and optional goods, which represents the middle-income group, improved moderately, and the retail sales of goods above designated size increased by an average of 2 in December3%, up 09 percentage points, the growth rate is still not high; Third, the growth rate of retail sales of services continued to rise slightly under the low base, with a cumulative year-on-year increase of 20 in 20230%, up 05 percentage points, indicating that service consumption, as the main driving force for the recovery growth of consumption after the epidemic, will play a driving role throughout 2023.
From January to December 2023, the national investment in fixed assets increased by 3% year-on-year, an increase of 01 percentage point. Due to the low base in 2022, the strength of investment is on the weak side, which can also be clearly seen from the sequential situation. The month-on-month increase in fixed asset investment in December was only 009%, the average monthly growth rate from October to December was only 013%。
Due to the tortuous nature of the economic recovery, it is difficult for companies to judge the strength and sustainability of the economic recovery, coupled with the damage to balance sheets caused by the "scarring effect", companies are very cautious in their investment behavior. Although nominal interest rates continue to fall, real interest rates (the level of interest rates excluding inflation) have risen due to the fact that ** is also falling, which has also inhibited the investment behavior of companies to a certain extent.
From a structural point of view, the continued recession of the real estate industry has led to a continuous decline in real estate investment, which has formed a greater drag on the overall investment. Real estate investment will decline by 9% year-on-year in 20236%, which has been declining by nearly 10% for two consecutive years, and the added value of real estate (unchanged**) in 2023 will decline by 1 year-on-year3%, which is also negative growth for two consecutive years. In 2023, the sales area of commercial housing will decrease by 8 percent year-on-year5%。Shenwan Hongyuan** believes that although the current real estate demand-side policy continues to increase, sales are still light, on the one hand, due to the expected impact of downward housing prices, but more importantly, the real estate supply-side risk leads to residents' concerns about the delivery of off-plan housing, and they are relatively cautious about the purchase of off-plan housing.
Low prices reflect insufficient demand
The GDP that is usually concerned is mainly GDP calculated in constant **, but in reality, it is nominal GDP that is more closely linked to corporate profits and household incomes, because profits and wages are reflected in current prices. The difference between the nominal value and the actual value will cause the difference between macro and micro perceptions.
In 2023, GDP (constant prices) will increase by 52%, but nominal GDP grew by only 46%, and the GDP deflator is about -0 year-on-year5%。In the fourth quarter of 2023, although GDP (constant prices) increased by 52%, due to the GDP deflator -1 YoY4%, and the year-on-year growth rate of nominal GDP was only 37%。In 2023, the national consumer consumption index (CPI) increased by 02%, which is lower than the annual expected target of about 3%, and is also significantly lower than the average CPI growth rate of 2% from 2013 to 2022. From a monthly point of view, except for January 2023, the year-on-year growth rate of CPI in the rest of the months is less than 1%, and there will be negative year-on-year growth for three consecutive months from October to December 2023.
Tianfeng ** believes that the gap between the GDP growth rate at constant prices and the current price growth rate explains the divergence between the micro perception and the macro data to a certain extent. Relying on price cuts, although the revenue of industrial enterprises maintained weak positive growth, the cumulative profit from January to November was -4 year-on-year4%, the industry "increased revenue but not profits".
*is the result of the impact of supply and demand. The continuous decline of this round of **, is oversupply or insufficient demand the main contradiction?
Wu Ge, chief economist of the Yangtze River, believes that unlike in the past, the current round of decline represented by industrial products is not overcapacity caused by excessive policy stimulation in the early stage. In the past few years, China's counter-cyclical regulation has been relatively prudent, and many traditional industries have undergone supply-side reforms, and the overall capacity expansion is very limited. Behind the current continuous decline, it is more reflected in the lack of aggregate demand.
Wu Ge pointed out that international experience shows that in a period of significant adjustment in the real estate market, the basic orientation of countercyclical policies in various countries is the same, whether fiscal or monetary, so as to make up for the gap in aggregate demand. However, the strength of the policy is the key to determining whether it can get rid of the downturn as soon as possible. And in terms of rhythm, if you can stay ahead of economic changes, you can get twice the result with half the effort. In view of the long adjustment time of this round of PPI, it may require a strong expansion of aggregate demand to really get rid of the low level.
Historically, China has also encountered difficulties with low inflation many times, such as in 1998, 2009 and 2015. During these periods, a multi-pronged macroeconomic policy has been implemented, ranging from loose monetary policy to more active fiscal policy, as well as related supply-side reforms.
At present, low prices have attracted the attention of policymakers, and it is expected that policies to boost effective demand and prices will be introduced soon. At its regular meeting in the fourth quarter of 2023, the Monetary Policy Committee of the central bank pointed out that it is necessary to "promote the recovery of low prices and keep prices at a reasonable level." Kang Yi said at a press conference that the low level of operation also reflects the lack of effective demand and other problems to a certain extent. "* attaches great importance to the problem of insufficient demand, and the ** Economic Work Conference clearly emphasized when planning the economic work in 2024 that it is necessary to focus on expanding domestic demand and promoting consumption to shift from post-epidemic recovery to continuous expansion. ”