Jorge Costa Oliveira
According to China’s National Bureau of Statistics, in 2023 the Chinese GDP grew by 5.2%, exceeding the government’s forecast of about 5% (3% in 2022). In the fourth quarter of 2023, the growth rate was also 5.2% year-on-year, higher than the previous quarter’s 4.9% year-on-year.
Several positive data points include: (i) a decrease in youth unemployment [from 21%] to 14.9%; (ii) maintaining a low overall unemployment rate (5.2%); (iii) a 7.2% increase in retail consumer sales; (iv) 4.6% growth in industrial production (good recovery in the manufacturing sector); (v) 5.8% growth in the service sector (with emphasis on hotel accommodation and IT services); (vi) a 5.9% increase in [public] investment in infrastructure; (vii) stability in consumer prices (+0.2%).
On the negative side, there is: (i) continued instability in the real estate sector, with falling prices, a decrease – to 6.5% – in the sale of new homes (26.7% in 2022), a slowdown in construction, insolvency of major real estate developers, and the sector still far from the end of the restructuring process; (ii) public spending limited by the burden of local debt; (iii) a decrease (-0.4%) in private investment (although, if real estate development were excluded, private investment would have grown by 9.2% [10.3% in high-tech industries]); (iv) a decline in Foreign Direct Investment (FDI) in China; (v) continued selling of Chinese stock market shares by foreign funds; (vi) a reduction in the trade balance surplus; (vi) investment in fixed assets grew only 3% (5.1% in 2022), sustained by spending on infrastructure and manufacturing industries; (vii) stagnation in the value of China’s exports and imports (with good recovery in Q4).
The government argues that this 5.2% GDP growth was achieved without massive stimuli; however, stimuli were used, such as the utilization in Q4 2023 of half of the funds raised from government-issued bonds totalling 1 trillion yuan ($140 billion) to finance natural disaster recovery projects. Accordingly, data cited by Bloomberg and the NIFD show that, in 2023, China’s debt-to-GDP ratio increased to 286.1% [of GDP] (+14%).
The GDP growth reported by China’s National Bureau of Statistics is questioned by credible entities, such as the Rhodium Group – which believes that China’s economic growth likely did not exceed 1.5% – and Capital Economics – whose “China Activity Proxy” suggests that Beijing has overestimated its GDP since early 2022 – with these issues being the subject of expert articles in Bloomberg and the Financial Times.
The lack of confidence in the official figures is probably what underlies the strange phenomenon of the announcement of a 5.2% GDP growth not only failing to halt but actually accentuating a significant fall in the value of shares in China’s stock markets, including Hong Kong.
The global relevance of the Chinese economy is enormous. There should be no room for doubt regarding its key economic indicators. The Chinese government needs to act to avoid this discrepancy between official numbers and the perception of investors and analysts.
Traditional Chinese wisdom (see the Analects) teaches that “ without the trust of the people, the government cannot stand.”
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