Editor's note: Wang Jianhui is the general manager of research and development at Capital Securities. The article reflects the author's opinions and not necessarily the views of CGTN.

2023 was a tough year for the Chinese economy. It not only had to shake off the prolonged pandemic containment and switch to full throttle for recovery right away, but also deal with a more uncertain external environment due to geopolitical issues and weakening demand. That is why the 5.2 percent gross domestic product (GDP) growth last year can be considered marvelous. It has reversed the sluggish growth of 3 percent in 2022 and performed better than the International Monetary Fund (IMF) projection of 5.0 percent. The government supported the real economy with abundant liquidity while keeping inflation at bay, and the consumer price index was marginally up by 0.2 percent compared with 2.0 percent in 2022, according to data released by the National Bureau of Statistics (NBS). The urbanization rate continued to edge up to 66.16 percent compared to 65.22 percent a year ago; and the urban-rural gap continued to narrow with the urban-rural disposable income ratio (average urban resident disposable income / average rural resident disposable income) down to 2.39 from 2.45. 

The growth model, thanks to skillful macroeconomic adjustments, has become more sustainable and balanced. Consumption has been gaining significance as a major driving force, while fixed asset investment resumed its normal role instead of being the last resort. Having increased by 7.2 percent, consumption as a share of GDP also increased from 36.5 percent in 2022 to 37.4 percent, according to calculations based on NBS data. Supportive policies and price stability encouraged personal spending, which generated more economic activities. The value added of storage and postal services, and accommodation and catering, which are sensitive to consumption, grew by 8.0 percent and 14.5 percent respectively. The fixed asset investment of 50.3 trillion yuan ($7 trillion) declined by 12.1 percent over the previous year, accounting for 39.9 percent instead of 47.4 percent of GDP last year. Obviously, the government scaled back fixed investment to avoid possible overcapacity in the future, and to give way to organic and intrinsic growth.

Looking closer at consumption and fixed asset investment, I found more positive changes through my calculations. For instance, consumer spending on catering services increased by 20.4 percent compared to 6.3 percent in the previous year; and its share of total consumption increased by 1.5 percentage points to 12.6 percent. Online retail sales accounted for 36.9 percent, 2 percentage points higher than in 2022; the share of online spending on services was up to 15.6 percent from 13.2 percent. These changes not only suggest the improvement of living standards and continuation of industrial upgrades, but also better employment prospects in related industries. 

As for fixed asset investment, major adjustments continued in the real estate market. Suffering from oversupply and weak demand, the industry saw its investment shrink by 9.6 percent after having dropped by 10 percent in the previous year. Its share of total fixed investment dropped from 27.3 percent in 2020 to 22 percent. Albeit unwilling to do so, investors would no longer view property investment as a safe bet and would consider moving their funds to more productive areas. In that way, investment gets diversified, and the economy is less dependent on this volatile industry.

Despite increased external uncertainties, the Chinese economy remains wide open to the world. Since 2018, Chinese import and export account for about 15 percent and 19 percent of national GDP respectively, and the trade surplus to GDP ratio ranged between 2.5 to 4.9 percent. Foreign trade, consumption, and fixed investment are referred to as the "troika" of China's economy. 

According to my calculation based on IMF data, the correlation coefficient between the Chinese and global economy in the last 10 years is 0.72, up from 0.48 in the previous decade. That means China has become more closely integrated with the world, or more globalized. In the past 6 years, China's GDP has maintained its share of over 16 percent of the global total. If the global economy grew by 3.5 percent, as projected by IMF, China's contribution would be 24 percent of the growth, or 0.83 percentage points.

It is particularly worth mentioning that globalized China has helped its trade partners to alleviate severe inflation pressures since 2022, according to data from China Customs. Due to the vast capacity of the manufacturing sector, lower producer prices (-3.0 producer price index in 2023) and weak local currency, Chinese export price index was as low as 90.8 (base year 2022 level = 100) or down by 9.2 percent at the end of November last year. Given that Chinese exports accounted for 9.31 percent of the world total, based on WTO data, my estimation is that our anti-inflation contribution could be up to -0.9 percentage points. Without it, the global consumer price index could have surged theoretically by 8.87 percent (the actual level was 7.97 percent) in 2022, according to World Bank data. 

We can take Sino-U.S. trade as an example to observe the latest situation. By the end of November 2023, the price of U.S. imports from China declined by 2.9 percent vs 0.4 percent at the beginning of the year, as indicated by data from the U.S. Ministry of Commerce. With a 6-percent share of U.S. total retail sales, goods "made in China" trimmed the U.S. consumer price index by 0.17 percentage points.