The year 2023 was the first year to fully implement the guiding principles laid down at the 20th National Congress of the Communist Party of China (CPC), and a year of economic recovery and growth after China secured a smooth transition in epidemic response. In the face of changes and turmoil in the international environment and myriad difficulties and challenges in China’s economic recovery, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, all regions and departments consistently followed the general principle of pursuing progress while ensuring stability, and focused on expanding domestic demand, optimizing structure, boosting confidence, and preventing and defusing risks. Against all odds, the Chinese economy charted a course of recovery and recorded impressive results. In 2024, China still faces considerable challenges in economic development and yet more favorable conditions and advantages. On the whole, opportunities outweigh challenges, and favorable conditions outnumber unfavorable factors. Recovery and long-term growth remains the unchanged trend of the Chinese economy. Factors conducive to high-quality development are accumulating and increasing, putting the economy on track for long-term growth.

First, the Chinese economy demonstrated resilience to mitigate short-term fluctuations and achieve long-term development.

You wouldn’t know how difficult it was unless you were there. In 2023, China embarked on a new journey under the guidance of the guiding principles of the 20th CPC National Congress and sought new development after a smooth transition was secured in epidemic response. The tougher and more complicated development environment made economic recovery a fluctuated process amid twists and turns. Every step forward was no easy. Externally, China faced growing pressure from the sluggish recovery of the world economy, the evolving and more complicated global landscape, frequent geopolitical conflicts, and the spillover effect of monetary policy tightening in developed western economies. Domestically, cyclical and structural problems and inadequate effective demand added to difficulties in the real economy. Faced with the difficulties and challenges down the road, the CPC Central Committee with Comrade Xi Jinping at its core took the helm and charted the course. All regions and departments faithfully implemented the decisions and arrangements of the CPC Central Committee and the State Council, making all-out efforts to stabilize the economic performance and promote high-quality development. With effective improvement in quality and reasonable growth in quantity, the Chinese economy, now bigger and stronger, demonstrates resilience to mitigate short-term fluctuations and achieve long-term development.

From the perspective of reasonable growth in quantity, China’s economy rebounded and the major expected targets were well attained. To measure the development level of an economy, one must first look at four macro indicators: economic growth, employment, price and international balance of payments. In 2023, China’s economic and social operations returned to normal in an all-round way. An effective combination of macro policies resulted in an economic growth rebound, an improving employment situation, a moderate price rise, and a basic equilibrium in the international balance of payments, putting the macro economy on a more stable footing. On economic growth, the GDP in 2023 exceeded RMB 126 trillion, a year-on-year increase of 5.2%, with the growth rate 2.2 percentage points higher than 2022. By quarter, the GDP increased by 4.5%, 6.3%, 4.9% and 5.2% respectively, showing a pattern of starting low before rising high and stabilizing. On employment, the surveyed urban unemployment rate averaged 5.2%, down 0.4 percentage points from the previous year. 12.44 million new jobs were added in cities and towns, with an increase of 380,000 people compared to the previous year. On price, the consumer price index (CPI) rose by 0.2% year on year, and the core CPI excluding food and energy prices by 0.7%, maintaining a moderate upward trend. On international balance of payments, despite shrinking external demand, intensified international competition and a high comparison base, China’s foreign trade stabilized with higher quality. The total import and export of goods reached RMB41.8 trillion, up 0.2% over the previous year, and the balance of foreign exchange reserves at the end of the year exceeded USD3.2 trillion.

From the perspective of effective improvement in quality, the Chinese economy kept upgrading and made new progress in high-quality development. The whole nation kept to high quality development as the top priority on agenda, fully and faithfully applied the new development philosophy on all fronts, sharpened its cutting edge through economic transformation and upgrading and made firmer strides in high-quality development. Throughout the year, important progress was achieved in developing a modern industrial system. Major innovations were made in science and technology. New industries were planned and accelerated to form new advantages. In 2023, the nationwide R&D spending accounted for 2.64% of GDP, a year-on-year increase of 0.08 percentage points. The added value of the equipment manufacturing industry above designated size grew by 6.8% over the previous year, and the output of high-tech products such as service robots and 3D printing devices increased rapidly, which underpinned the stable development of industries. Throughout the year, the economic structure was transformed and optimized, evidenced by a more prominent role of the service industry and consumption as main drivers of growth and the steadily improving rate of urbanization. In 2023, the service sector’s added value contributed 60.2% to economic growth, an increase of 4.9 percentage points over the previous year, and final consumption expenditure contributed 82.5%, an increase of 43.1 percentage points. At the end of the year, the urbanization rate measured by permanent residents was 66.16%, an increase of 0.94 percentage points. Throughout the year, green and low-carbon transition continued to deepen, clean energy projects were accelerated, and the energy production and consumption structure was further optimized. In 2023, the installed capacity of renewable energy power accounted for more than half of the total, exceeding that of thermal power for the first time in history. The proportion of non-fossil energy consumption in total energy consumption increased by 0.2 percentage points over the previous year. The output and sales of new energy vehicles boomed, ranking the top in the world for nine consecutive years. Throughout the year, robust and effective measures were taken to ensure people’s well-being and weak links in areas important to people’s lives were shored up, which delivered a better life for the people. In 2023, the nationwide per capita disposable income of residents was 39,218 yuan, a real increase of 6.1% year on year. The Engel coefficient was 29.8%, down 0.7 percentage points from the previous year. Looking back on 2023, the foundation for security and development was consolidated with improved capacity for food and energy security and more resilient industrial and supply chains, which secured the bottom line to prevent systemic risks.

Second, the Chinese economy remained a bright spot in the global landscape.

What seems to be commonplace tends to be the most extraordinary. An astute understanding of an economy calls for historical and comparative perspectives. Vertically, China’s main economic and social indicators in 2023 improved significantly compared with those in 2022. The absolute volumes of most indicators such as power generation and electricity consumption, output of major industrial products, and scale of investment and consumption exceeded the levels in 2019 before the pandemic, indicating that China’s economic performance improved as a whole. Horizontally, some developed countries experienced economic downturn and high prices, while some developing countries grappled with foreign debt crises and social instability. China, on the other hand, remained a bright spot, enjoying economic recovery and overall social stability.

China was one of the leaders in economic growth and remained the biggest engine of global growth. In 2023, China’s economic growth rate of 5.2% was not only higher than the estimated global growth rate of about 3%, but also among the best among the world’s major economies. In 2023, the American economy grew by 2.5% over the previous year. The International Monetary Fund (IMF) predicted that the economies of the euro zone and Japan would grow by 0.7% and 2.0% respectively, both significantly lower than that of China. As calculated at comparable prices, China’s economic increment exceeded RMB6 trillion, equivalent to the economic aggregate of a medium-sized economy. IMF predicted that China’s contribution to global economic growth would exceed 30%, making it the biggest source of impetus for world economic growth. China’s per capita development level has steadily increased, ranking it among the medium-high income countries. In 2023, China’s per capita GDP was RMB89,358, an increase of 5.4% year on year, or USD12,700 at the current-year average exchange rate, which had been above USD12,000 for three consecutive years.

China’s consumer prices rose mildly, in sharp contrast to the high inflation worldwide. In 2023, China’s CPI edged up by 0.2% year on year, a slower pace than in 2022. This may be explained by the following reasons. Non-economic and non-conventional factors led to a sharp rise in food and energy prices in 2022, which dropped in 2023, exerting a great impact on the CPI. Specifically, food prices in 2023 fell 0.3% in a break with 2.8% increase in the previous year, weighing down the CPI by about 0.06 percentage points. Energy prices dropped 2.6%, down from the 11.2% increase in the previous year, dragging down the CPI by about 0.2 percentage points. The core CPI rose by 0.7% over the previous year, among which the service price increased by 1%. The overall price stability showed that the price decline in China was not universal or comprehensive, but partial and structural. By contrast, inflation was severe worldwide. The IMF forecast a close to 7% global inflation in 2023. The CPI in the US and the euro zone increased by 4.1% and 5.5% respectively over the previous year, making it a delicate balancing act to maintain stable growth and control inflation. As the Spring Festival approached, consumer demand increased, and service consumption  such as dinning out and traveling became more active, which was expected to help consumer prices stabilize and rebound.

China’s export remained stable, so did its status as a major trading nation. In 2023, the momentum of global economic recovery was weak, trade protectionism rampant, and the trend of global economic fragmentation more notable as countries looked more inwardly, posing a hindrance to China’s foreign trade. According to the World Trade Organization, global trade would only increase by 0.8% in 2023. Overall, despite challenges and pressure, China’s export volume reached a new high on a high base, maintained a stable share of global market, improved quality, and demonstrated strong resilience and comprehensive competitiveness. In 2023, China’s export reached RMB23.8 trillion, an increase of 0.6% over the previous year, which was better than that of major export-oriented economies. By the end of 2023, China had been the world’s top exporter of 811 products. The share of Chinese export on the international market was expected to stay around 14%, a fairly high level, thus securing China’s position as the largest trader in goods. At the same time, the role of private enterprises was enhanced, foreign trade gathered new momentum, and new forms of business such as digital trade and cross-border e-commerce flourished, providing effective supplements to export as a growth driver. In 2023, private enterprises accounted for 53.5% of China’s total import and export, and the import and export volume through cross-border e-commerce increased by 15.6% over the previous year.

Third, China’s economic development faced more favorable conditions than unfavorable factors.

　

Long vistas calls for a broad perspective. To get an accurate understanding of China’s economic development, it is important to look at both its current performance and its long-term trend, and take into account not only the current situation, but also from a long-term perspective. Now and the years to come, the Chinese economy still faces strategic opportunities and challenges. That said, opportunities outweigh challenges and favorable conditions outweigh unfavorable factors. The underlying trend of economic recovery and long-term growth stays unchanged. As long as it acts on the opportunities, turns crises into opportunities, and deals with these risks and challenges forcefully and effectively, China can sustain the positive recovery momentum of economic development.

China enjoys the systemic advantage as a socialist market economy. China’s socialist market economy is a system that taps the synergy between the socialist system and the market economy. It can not only give full play to the strengths of the market economy and let the market play a decisive role in the allocation of resources, but also has the institutional advantage that can pool resources for major undertakings. This is the fundamental safeguard for economic stability and long-term success. Since the 18th CPC National Congress, China has kept improving the system and mechanism whereby the CPC exercises leadership over economic and social development, deepening reform and expanding opening up across the board, and continuously improving the system of socialist market economy. As a result, social creativity and market vitality have been unleashed, perpetuating the two miracles of rapid economic development and long-term social stability, and demonstrating China’s strong resilience in defusing risks and overcoming challenges. With stronger national governance capabilities, China can inject strong impetus into high-quality development by better transforming institutional advantages into governance efficiency and development momentum.

China enjoys the demand advantage as a super large market. The market is the scarcest resource. China has a population of more than 1.4 billion, a per capita GDP of more than USD12,000, and a rapidly improving consumption structure, making it a gigantic market with the greatest potential and advantages. No matter how the international situation changes, the vast domestic market is a powerful safeguard for us to cope with various risks and challenges. In 2023, China’s investment in fixed assets (excluding rural households) reached RMB50.3 trillion, total retail sales of consumer goods RMB47.1 trillion, and online retail sales of physical goods RMB13.0 trillion, making China the second largest commodity consumption market and the largest online retail market in the world. Domestic demand contributed 111.4% to economic growth, an increase of 25.3 percentage points over the previous year, reinforcing the role of domestic circulation as the mainstay. China has a vast territory, with existing gaps between urban and rural areas and among different regions. It is still in the middle of industrialization and urbanization. Great potential lies ahead for China to catch up with advanced economies. People still have a huge demand for high-quality livelihood. With progress made in building a unified national market, integrating urban-rural development, and facilitating green and low-carbon transition, potential consumption and effective investment will be stimulated, thus creating broad market opportunities and demand for economic development.

China enjoys the supply advantage with a full-fledged industrial system. After more than 40 years of reform and opening up, China has built a more solid material foundation, with the most complete industrial system in the world and convenient software and hardware infrastructure networks. The large industrial scale and strong supporting capacity give China notable advantages in cost, category of products, and speed of production, which enables China to quickly meet standardization and customization needs on all fronts. As such, China lives up to its reputation as the world’s largest manufacturer. In 2023, the added value of China’s manufacturing industry reached RMB33 trillion, accounting for about 30% of the global total and ranking first in the world for 14 consecutive years. The supply capacity of major products was steadily improved, effectively ensuring supply on domestic and international markets. In 2023, the output of industrial steel and chemical fiber above designated size reached 1.36 billion tons and 71.27 million tons respectively, automobiles 30.11 million units, and smart phones and microcomputers 1.14 billion units and 330 million units respectively, all ranking first in the world. In recent years, China has made a number of world-leading achievements in major scientific and technological facilities, water conservancy projects, transportation hubs and information infrastructure. The leapfrog progress in infrastructure has delivered a strong boost to the high-quality socio-economic development. By the end of 2023, the nationwide railway operating mileage reached 159,000 kilometers, including 45,000 kilometers of high-speed rail.

China enjoys the talent advantage with a large number of high-caliber labor force and entrepreneurs. In the past two years, China’s total population declined slightly, but this does not mean the loss of demographic dividend. China still has a comparatively abundant labor force of improving quality. China’s human resources are more compatible with its industrial system. Demographic dividend still exists, and talent dividend is building up, which can provide talent and intellectual support for high-quality development. In 2023, China’s working-age population exceeded 860 million, with 11.05 years of education on average, among whom over 250 million received university education. China leads the world in the total amount of human resources, scientific and technological human resources and R&D personnel. The high-caliber labor force has become the backbone in promoting China’s industrial transformation and upgrading and underpinning China’s innovation drive. By the end of 2023, China’s domestic valid invention patents reached 4.015 million, a year-on-year increase of 22.4%, making it the first country in the world with over 4 million domestic valid invention patents. There are 180 million business entities and about 400,000 high-tech enterprises in China, and the number of unicorn enterprises ranks second in the world. Innovative vitality and internal motivations of the business entities are continuously stimulated, and a large number of entrepreneurs who are committed to quality and excellence are thriving in China. They will inject new impetus into the high-quality development of the Chinese economy.

Since the 18th CPC National Congress, China has developed a wealth of experience, mechanisms and tools in macro regulation through its robust and effective response to difficulties and challenges all along the way. The Chinese government now oversees a low level of debt and inflation and has an enriched toolkit of policy instruments at its disposal. There is still much room for manoeuvre in fiscal, monetary and other policies and conditions and space for stronger implementation of macro policies. It should also be noted that China’s economic recovery and growth is beset with difficulties and challenges, as a result of insufficient effective demand, overcapacity in some industries, weak social expectations, hidden risks, blockage in domestic circulation, and rising complexity, severity and uncertainty in the external environment. Going forward, we will act on the principles of seeking progress while ensuring stability, promoting stability through progress, and establishing the new before abolishing the old. We must strengthen our awareness of potential dangers and maintain strategic resolve, give full play to the advantages of our system and institutions, make good use of the policy toolbox, and effectively deal with the difficulties and challenges in economic development, so as to promote the steady growth of the Chinese economy on the track of high-quality development. 

(Reprinted and translated from Qiushi Journal, Chinese Edition, No.03, 2024)