Shifting economic structure makes China's GDP growth target realistic

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China has set this year's GDP growth target at around 5 percent, according to the government work report submitted Tuesday to the national legislature for deliberation.

The figure, on a par with last year's, is in line with economists' expectations, but some Westerners describe the target as "ambitious."

"Matching last year's figure will be harder as 2024 lacks the favorable comparison with the pandemic's low base that boosted previous numbers," according to Bloomberg. "A property crisis, deepening deflation, a stock market rout, and mounting local government debt woes" are putting pressure on the Chinese economy, which "remains heavily reliant on credit-driven, state-led investment," Reuters said.

Undeniably, the country's high-speed growth based on investment and low-cost manufacturing could lead to some imbalances, posing challenges for this year's 5 percent target. But China has been taking concrete measures and is determined to take more solid steps to tackle its structural constraints – paving the way for this year's GDP growth target.

Reducing economic imbalances, according to the World Bank, requires shifts in the structure of the economy from manufacturing to high value services, and from investment to consumption. For this end, China is determined to foster new quality productive forces and expand its domestic demands.

According to Tuesday's government work report, the country will step up efforts in big data and launch an AI-plus initiative. "We will fully leverage the strengths of the new system for mobilizing resources nationwide to raise China's capacity for innovation across the board," the report said.  China's expenditure on research and experimental development activities reached 3.3 trillion yuan in 2023, up by 8.1 percent over that of 2022, said Chinese Minister of Science and Technology Yin Hejun on the sidelines of the two sessions on Tuesday.

These endeavors are vital for the country to shift its economic structure from low-cost manufacturing to high value services; but in face of complex economic challenges, fostering new quality productive forces alone is not enough. There is consensus that against the backdrop of a shrinking real estate sector, consumption has become increasingly essential for China to sustain the pace of its economic growth.

"Without major consumer-centric stimulus or market liberalization policies, foreign business in China will continue to face challenges," Bloomberg quoted Drew Thompson, a former Pentagon official and a senior fellow at the Lee Kuan Yew School of Public Policy in Singapore, as saying.

If China's GDP is to continue growing at 4-5 percent for the next decade, either other major economics must reduce their investment shares to accommodate China, or "China must establish policies that cause the locus of growth to shift from investment to domestic consumption," said Michael Petties, a nonresident senior fellow at Carnegie China.

The former, apparently, is very unlikely. To improve its consumption environment, China will integrate its strategy of expanding domestic demand with efforts to deepen supply-side structural reform, according to the government work report. The country will also launch a year-long program to stimulate consumption. Policies will be launched to promote digital, environmentally-friendly, and health-related consumption as well, the report said.

In addition, the government is determined to create over 12 million jobs in urban areas in 2024. A rising employment rate and an increase in residents' income will help bolster consumer confidence and thus revive consumer demand. In 2023, final consumption drove economic growth by 4.3 percentage points. Looking ahead, with more robust policy support, consumption is expected to contribute more to China's GDP growth in 2024.

It's true that to match its 5 percent GDP target, China lacks the favorable comparison with the pandemic's low base; but as this year's government work report has shown, China will introduce more robust measures in 2024 to foster new quality productive forces and stimulate domestic consumption. These are vital for the shift in China's economic structure, paving the way for the country's high-quality growth.

Against pessimistic voices, China's 5 percent GDP target – with the resolve from authorities and the growth potential tapped from the country's shifting economic structure – is not only achievable, but also inspiring for global economic growth.

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