New growth drivers, robust policy support to help China drive global economy

Wind turbines in the distance are at work before sunset in Rongcheng, Shandong province, on Jan 6. LI XINJUN/FOR CHINA DAILY

Despite pressures from a property downturn, lackluster demand both at home and abroad and a more complicated external environment, China's economic prospects this year remain bright; therefore, global business executives and economists said their confidence and optimism are undented.

They further said China's economy will perform better this year than in 2023, with the existing policies taking effect gradually and more stimulus in the offing, mainly fueled by a steady recovery in domestic demand. China will continue to remain a key growth engine for the world economy, given its ultra large domestic market, a complete industrial system and abundant high-quality workforce.

Cao Yang, global vice-president of Baker Hughes and president of Baker Hughes China, voiced confidence in China's future economic growth, saying China's manufacturing sector has demonstrated strong resilience and stability.

He said the global energy company has seen huge growth potential in the ultra large Chinese market, and the company has benefited from the continued recovery of the Chinese economy.

In recent years, Baker Hughes has maintained double-digit business growth in China, reaching a historic high in 2022. Cao highlighted that the company's procurement volume in China surged by over 60 percent in 2022 compared to 2021, underscoring China's pivotal role as a comprehensive supply chain hub.

"China is the world's largest producer of over 220 types of industrial products," he said in an exclusive interview with China Daily. The country boasts the biggest and most complete industrial system worldwide, he said.

Official data showed that China is also the only country to obtain all the industrial categories listed in the United Nations industrial classification.

Highlighting China's key role as a global hub for industrial manufacturing, Cao said the Chinese market is of great significance for applying the company's cutting-edge technologies.

Looking ahead, he said the focus will be on meeting China's need for energy in a better way and reducing carbon emissions as well as rendering improved services to China's manufacturing sector. "We firmly believe that the Chinese market will continue to be a crucial engine propelling global economic growth."

China's economy expanded by 5.2 percent year-on-year in 2023, above the country's preset economic growth target of around 5 percent, data from the National Bureau of Statistics showed, indicating that economic recovery is steadily gaining momentum in the post-pandemic era.

Notably, the country's value-added industrial output grew by 6.8 percent year-on-year in December, following a 6.6 percent growth in November.

An employee operates machines at a company's digital manufacturing plant in Nanyang, Henan province, on Dec 15. GAO SONG/XINHUA

"The Chinese market is still huge with very great potential," said Fabien Pacory, vice-president of the French Chamber of Commerce and Industry in China (CCI France Chine). "The country is moving in the right direction … I'm quite confident about China's economic prospects in 2024, as I can see many adjustments and many big efforts have been made by the provincial governments and central government. We will be able to see some improvements at the end of this year."

He said many French companies still think China is a very important place for production as well as a key market. "They are confident that China is working hard to make sure everything is going in the right direction."

Zou Yunhan, deputy director of the macroeconomic research office at the State Information Center's Department of Economic Forecasting, said China remains a key growth engine for the world economy, contributing around one-third of the global economic growth in 2023.

The momentum of China's economic recovery is poised to undergo further consolidation and strengthening this year, propelled by robust policy support, the advancement of industrial transformation and upgrading, and the continuous deepening of reforms, she said.

Zou anticipated that China's GDP will likely grow by around 5 percent this year, with a steady improvement in consumption and investment.

"As the Chinese economy gradually shakes off the impact of the pandemic, consumer spending recovery will continue to accelerate this year," she said. "In terms of investment, with the optimization and adjustment of real estate policies, the downward impact of real estate investment will weaken this year. And a forceful fiscal policy will drive robust growth in infrastructure investment, leading to steady growth in investment."

Data from the National Bureau of Statistics reflected the pressures facing the economy, including insufficient domestic demand and slowing external demand. China's consumer prices dropped for the third consecutive month in December, and the country's factory activity contracted for the third consecutive month in December.

The country's consumer price index, a main gauge of inflation, dropped by 0.3 percent year-on-year in December after a 0.5 percent drop in November. Meanwhile, China's official purchasing managers index for the manufacturing sector fell to 49 in December from 49.4 in November, below the 50-point mark that separates contraction from growth, according to the NBS.

Experts said the official figures indicate that China's broader economy is still facing pressures, calling for further steps to boost domestic demand and foster new growth drivers.

Workers from State Grid check and repair photovoltaic panels in Shijiazhuang, Hebei province, on Jan 14. YANG SHIYAO/XINHUA

Despite grappling with a complex external environment, inadequate domestic demand and risks linked to local government debt and the property sector, China still has plenty of room and sufficient policy tools to reinforce the growth of the world's second-largest economy, Zou said.

The tone-setting annual Central Economic Work Conference in December called for efforts to pursue progress while ensuring stability, consolidate stability through progress and "establish the new before abolishing the old".

It urged the introduction of more policies that will help stabilize expectations, growth and employment, as well as active endeavors to promote the transition of growth models, structural adjustment, and quality and efficiency improvement, so as to consolidate the foundation of stable economic development with a positive outlook.

Zou said the meaning of "establishing the new before abolishing the old" refers to managing the relationship between the growth of new and traditional economic drivers during the process of economic structural transformation.

"It emphasizes the need to first establish and strengthen new economic drivers before gradually phasing out or reforming the outdated ones, rather than abolishing the old drivers before the new ones are firmly in place."

She further said emerging sectors like new energy vehicles and high-tech industries will serve as new growth drivers and sturdy engines supporting China's future economic development.

"I believe China's automotive sector is poised to experience substantial growth, particularly given its leading global position in the development of NEVs. And the country's high-tech industry is also undergoing rapid growth."

China saw its vehicle production and sales both exceed 30 million units in 2023, with the figures expected to grow by around 3 percent to 31 million this year, according to the China Association of Automobile Manufacturers.

China surpassed Japan last year as the world's largest auto exporter, with 4.91 million vehicles shipped overseas last year, up 57.9 percent year-on-year. The association estimates exports this year will reach 5.5 million units.

While facing a more complicated and grimmer external environment and a gloomy global outlook, China's booming new sectors will serve as new growth drivers supporting export growth and steady economic recovery, said Zhang Xiaoqiang, executive vice-chairman of the China Center for International Economic Exchanges.

Looking ahead, he said China has the conditions and capabilities to achieve around 5 percent GDP growth this year. So, more efforts should be made to spur both traditional and new types of consumption, he said.

More efforts should also be made to increase people's incomes and create a better consumption environment, speed up the building of a unified national market and accelerate the construction of a modern industrial system, which will help form a virtuous cycle between consumption and investment, Zhang said.