2024-03-06 11:19:39
China’s government wants to build on last year’s economic growth. Economists are skeptical as to whether this will work. How the People’s Republic wants to achieve the goal and what could prevent it from doing so.
China is aiming for economic growth of around five percent this year. The People’s Republic would like to follow on from last year. In 2023 the economy grew by 5.2 percent. Even though, with the exception of the Corona years, this is the worst value since the 1990s, many economists are skeptical as to whether the Chinese economy can continue to grow at this rate. The real estate crisis, record youth unemployment and weak consumption among the population are putting a strain on the country.
Beijing has announced that it will create more than twelve million new jobs this year, following the same course as previous years. The unemployment rate is also expected to remain at 5.5 percent, as in 2023. How many jobs have been lost or will be lost due to slower growth is unknown. In addition, the statistics only show unemployment in the city. Millions of migrant workers and the entire rural population, who often live and work in precarious conditions, are not included in the data.
China wants to increase spending and investment
Most recently, consumer prices in China fell for four months in a row, falling by 0.8 percent in January, the highest level in 14 years. This deflation could threaten economic growth because consumers tend to delay spending when prices fall. Beijing stated “around three percent” as its inflation target for 2024. Last year inflation was 0.2 percent. This is a low value compared to other economies.
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The Chinese government also announced that it would make it easier to travel, work and study in the country. Foreign investments are also expected to increase. In recent years, according to the US company Sinoinsider, these have fallen to their lowest level since 1993.
China’s public spending is expected to rise by 1.1 trillion yuan to 28.5 trillion yuan next year. In addition, Beijing will issue government bonds worth 1 trillion yuan to “strengthen its capabilities” in key areas.
Obstacles to Chinese economic growth
The real estate sector was the driver of Chinese economic growth for a long time, but now it has become an obstacle. Some property developers are facing bankruptcy. Stabilizing the industry is “crucial for growth,” as Larry Hu, economist at the investment bank Macquarie, told the AFP news agency. The government must therefore promote demand for real estate by acting as a buyer and granting more loans.
China’s exports fell last year for the first time since 2016. Demand fell due to global inflation. Foreign trade with the USA also fell for the first time since 2019. Geopolitical tensions with the United States and dealings with Taiwan could further weigh on the economy. Meanwhile, trade with Russia reached record levels. However, this cannot compensate for the demand from Europe and the USA.