Experts see untapped potential in China’s economy

Analysts have suggested that China's economy harbors more untapped potential even as the recent release of the country's annual statistical communique and the latest purchasing managers' index (PMI) data revealed new growth trends.

The 2023 statistical communique, a yearly report detailing the country's economic performance across various sectors, alongside the PMI data, which gauges the health of the manufacturing and service sectors, provides key insights into the world's second-largest economy's current state and future outlook.

According to the communique released by the National Bureau of Statistics, China’s economic growth for 2023 was confirmed at 5.2 percent year on year, matching the preliminary figures released in January and surpassing the government's target of "around 5 percent." This growth, accompanied by a 5.4 percent increase in per capita GDP, highlights China's robust economic momentum.

In contrast, the February PMI data revealed a slight dip in manufacturing activity to 49.1 in February. Bruce Pang, chief economist at JLL Greater China, viewed this as a temporary fluctuation attributed to seasonal factors like the Chinese New Year,  rather than a long-term trend. Despite this slight contraction, the non-manufacturing PMI showed robust growth, indicative of China's ongoing transition towards a more service-oriented economy.

While some have questioned the sustainability of China's economic growth, other observers argue that these analyses fail to capture the dynamic nature of China's economy and its capacity for adaptation and innovation.

A commentary piece in the national newspaper Economic Daily argues that strategic utilization of China's untapped capital and labor resources could significantly propel economic expansion beyond the 5 percent threshold.

It said that two major factors were under-utilized: Namely, in terms of capital investment, the industrial capacity utilization rate of 75.1 percent in 2023 was still below the "normal" level of around 80 percent; and in terms of labor, an average urban unemployment rate of 5.2 percent was still relatively high.

The article also pointed out that China's prolonged period of high-speed growth in the past has been attributed not only to an increase in input factors but more crucially to the institutional dividends unleashed by reform and opening-up, as well as the transition of labor from low-productivity agricultural sectors to higher productivity industrial and service sectors. The optimal combination of production factors is what many scholars refer to as unleashing "structural potential," it said.

The release of these economic indicators comes just ahead of China's annual key political meetings called "Two Sessions," where the country's policy direction for 2024 is expected to be outlined. These sessions are anticipated to focus on efforts to consolidate economic recovery gains and pursue high-quality development, further bolstering confidence in the nation's economic trajectory.