Solid growth of China's economy provides good market for businesses and investors

Editor's note: Jiahe Chen is chief investment officer at Novem Arcae Technologies. The article reflects the author's opinions and not necessarily the views of CGTN.

China's economy grows again. In the first half of 2024, China's GDP increased by five percent compared with a year ago. This shall give more confidence to businesses and investors who are interested in finding opportunities in China. The latest data was published by the National Bureau of Statistics (NBS) on July 15. Specifically, the annual GDP growth rate was 5.3 percent in the first quarter and 4.7 percent in the second quarter. Meanwhile, the quarterly GDP growth rate was 0.7 percent for the second quarter.

As an investor myself, I am feeling very comfortable with this five-percent growth rate. Not only because it matched the five-percent target set by the government at the beginning of the year, but also because this growth rate is achieved amid a sluggish real estate market, which shows the potential growth rate is even well above five percent when taking out the temporary negative impact caused by the real estate market. 

In the first half of 2024, the overall investment for real estate was 5.25 trillion yuan ($723 billion), 10.1 percent lower than the same period last year. Among this investment, 3.99 trillion yuan was made toward residential real estate, 10.4 percent lower than the first half of 2023. Meanwhile, the total floor space of residential real estate sold in the first half of this year also reduced by 21.9 percent, and sales of new-built residential real estate decreased by 26.9 percent. 

Although China experienced a strong headwind with its real estate market, the country's GDP still grew by five percent in the first half of this year. This shows us the resilience and potential of China's economy. We can even make a bold assumption that the potential growth rate of China's GDP in the longer term is well over five percent. A growth rate between six to seven percent is a better match for China's growth potential and this speed can be achieved once the real estate market returns to normal. 

In the first six month of 2024, the overall consumption in China reached 23.6 trillion yuan, 3.7 percent more than one year ago. Meanwhile, consumption excluding automobiles increased by 4.1 percent over a year ago. The reason that we can count on China's consumption growth is simple: China's consumption is taking a smaller part of its economy compared with matured economies, while Chinese people are earning more income. 

According to NBS data, in the first half of 2024, disposable income per capita in China reached 20,733 yuan, 5.4 percent higher than last year on a nominal basis and 5.3 percent higher in real terms. Meanwhile, the urban surveyed unemployment rate was 5.1 percent at the end of this June, 0.2 percentage point lower than one year ago. 

Alongside rising incomes, China's per capita consumption also increased by 6.7 percent in the first half of 2024, reaching 13,601 yuan. This also means businesses in the consumer market are facing 6.8 percent growth in revenue compared with one year ago, which can be considered as a very rapid growth rate when compared with consumption markets all around the world.

Based on the income and spending data listed above, we can also see a 1.4-percentage-point gap that lies between the growth rate of per capita consumption and per capita income. This means China's consumers are spending faster than they earn. The reason behind this gap might be that the people are more willing to spend when facing a declining real estate market and a lower budget that is needed for buying a new estate.  

Alongside consumption, China's global trade has also surged. In the first half of 2024, China's total export and import reached 21.2 trillion yuan, 6.1 percent more than one year ago, with a trading surplus of 3.1 trillion yuan. A strong and robust trading sector is not only helping the growth of the Chinese economy, it is also providing a solid support to China's trading partners all over the world.

Last but not least, the growth of China's fixed asset investment has also provided a strong support to economic growth. Total fixed asset investment in China reached 24.5 trillion yuan in the first half of 2024, 3.9 percent more than one year ago. 

Although this growth rate is not bad, it is far from the truth growth potential of China. When we exclude the impact caused by the real estate market, we can find that fixed asset investment increased by 8.5 percent, among which the investment for high-tech manufacturing and services increased by 10.1 percent and 11.7 percent respectively. This rapid rise of China's investment in high technology forms a solid foundation for China's economic growth in the long-term. 

With all these data analyzed above, we can see that China's economy has been growing at a moderate speed in the first half of this year. Meanwhile, if we exclude the impact from the real estate sector, we can find that China's economy has been growing at a pretty rapid speed. The strong and stable growth of China's economy provides a very solid foundation for businesses and investors all over the world.