China's economic promise: Key factors ensuring long-term growth

Editor's note: In the current global economic environment, China's economy has demonstrated its resilience and potential. How should the developing trend of China's economy be viewed? In what ways are the advantages of China's economic development reflected? Global Implications of China's Economic Growth is a five-part series examining the questions given. The second article focuses on China's manufacturing sector. Chen Jiahe, a special commentator on current affairs for CGTN, is the chief investment officer at Novem Arcae Technologies. The article reflects the author's opinions and not necessarily the views of CGTN.

For investors who are searching for places to invest in this volatile world, the Chinese market is a place they must consider. Looking into the future, the long-term growth of China's economy is guaranteed.

Although China's economy is already the world's second-largest, the per capita GDP of China is still at a moderate level, which means there is a large potential for economic growth in the future.

According to the World Bank, the GDP per capita of China, measured by the constant price of U.S. dollars in 2015, was $11,560.2 in 2022, while the GDP per capita for the United Kingdom, the United States, Japan and South Korea were $47,923.5, $62,789.1, $36,202.6 and $33,719.4, respectively, in the same year.

If we use the range of $35,000 to $50,000 to measure the growth limit of the per capita GDP of China, there is still a large potential for the Chinese economy to grow.

Meanwhile, the large size of the Chinese economy means it has more possibility to utilize the economics of scale, which allows per capita GDP to grow at a level that can hardly be achieved by a smaller economy.

The economics of scale means that the larger an economy or a market is, the more it can benefit from specialization and the lower cost of marginal production, thus the higher the economic development level. This is the main reason behind a higher per capita GDP in the United States when compared with countries such as the United Kingdom and Germany. And that's one of the reasons why the long-term growth of China's economy is guaranteed in the future.

Let us now shift our attention from the analysis of the overall Chinese economy to detailed economic sectors to find out more factors.

As reported by the Centre for Economic Policy Research, "China is the world's sole manufacturing superpower." Supported by the completed industrial system, the productivity level of China's manufacturing industry continues to improve. The building of factories in China enjoys low production costs and high production efficiency, attracting various types of capital to invest. This ensures the advantage of China's manufacturing industry in terms of production capacity and output.

Moreover, according to the ARC Group, "China has been the world's largest manufacturer of heavy equipment and construction machinery by volume for many years." For example, automobile production and sales exceeded 30 million units, respectively, for the first time, ranking first in the world for 15 consecutive years. It is expected that these numbers will reach 31 million units in 2024, and the production and sales of new energy vehicles will reach about 11.5 million units, an increase of about 20 percent.

The latest progress of China's industrial system is the building of China's own commercial plane, the C919, which is now offering the global aviation industry an alternative from the Boeing-Airbus duopoly. The safety and quality of China's nuclear power plants have also earned a worldwide reputation, and the country leads the world in the number of nuclear power units under construction.

This large, efficient and complete industrial system provides the Chinese economy with powerful support. Unlike the development of smaller economies that rely on tourism and international trade, the growth of a super-large economy such as China must be built upon a solid industrial foundation, which provides abundant jobs, profit and business opportunities for its population.

China's ascent to prominence in the global industrial arena can be attributed to its highly efficient market economy. Bolstered by world-class infrastructure and a competitive, free-market environment, companies vie with one another, thereby fostering the development of a sophisticated industrial system.

Apart from its industry, China also owns a growing and prosperous consumption market, fueled by 1.4 billion consumers. The market is now one of the largest ones in the world and is standing side by side with the consumption markets of Western Europe and North America.

As China's consumption accounts for a smaller share of the overall economy, relative to matured economies, the growth of consumption will give more support to the Chinese economy in the future. According to the National Statistics Bureau, China's consumption reached 4.7 trillion Chinese yuan (around $654 billion) in 2023, 7.2 percent more than that a year ago, while the GDP growth rate of the same year was 5.2 percent. The consumption economy has brought two more percentage points to the economic growth of China.

Meanwhile, online shopping has contributed to China's economic growth. According to the Ministry of Commerce, China's e-commerce increased by 11 percent in 2023, 3.8 percent more than the overall growth of the consumption economy and 5.8 percent more than the GDP growth rate. As a more efficient way of consuming, e-commerce will bring more quality growth to the Chinese economy in the future.

With its strong and large market, a complete and well-developed industrial system, as well as a large and vivid consumer market, the growth of China's economy in the long term is a sure thing. For the investors and capital that can successfully seize this opportunity, their investment return in the long term will be tremendous.

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