China's economy showed signs of improvement, with its growth forecast for 2023 being adjusted upwards, yet challenges remain with the property sector’s continued struggles. According to recent reports, the Chinese government announced on Thursday, the revision of its GDP for 2023 now sits at 129.4 trillion yuan ($17.7 trillion), based on findings from the country's latest economic census, which is conducted every five years. This new figure marks about a 2.7% increase from earlier estimates of 126.06 trillion yuan.
This improvement indicates a growth rate of 5.2% annually, starkly contrasting with the previous year’s growth which was merely 3%. Such data paints a more optimistic picture of China's recovery from the effects of the COVID-19 pandemic and subsequent economic disruptions. Despite the uptick, officials have refrained from specifying the exact impact of this revision on the overall economic growth.
Provided during the economic census, these revisions come at a time when the Chinese economy is gradually bouncing back from several setbacks, including severe disruptions to business activities and travel due to the pandemic and the pervasive downturn in the housing market. This downturn was exacerbated by the government's crackdown on excessive borrowing among property developers.
To stimulate economic activity, the Chinese government has ramped up efforts to counteract declining consumer spending and business investment. Measures announced include increased spending and the issuance of more bonds to aid local governments grappling with financial strains, partly due to the current property market crisis. The World Bank, acknowledging these measures, highlighted their positive influence, recently lifting its growth estimate for China from 4.8% to 4.9% for this year.
Further projections by the World Bank suggest China’s growth for 2024 is now expected to reach 4.5%, up from the previous forecast of 4.1%, indicating sustained albeit slower growth trends moving forward. Looking to 2026, the World Bank estimates the economy could expand at just 4%, continuing the trend of deceleration.
Despite signs of rebound, significant challenges still impede broader economic recovery; foremost among these is the continuing weakness within the housing sector. Many homeowners whose property values have decreased appear hesitant to spend, which economists believe will keep inflation low. Current forecasts project inflation to hover at just 0.4% this year, with only modest increases anticipated to 1.1% by 2025.
The World Bank's assessments also discuss broader socio-economic issues, indicating the persistence of inequality across China. Their calls for improvements to the social safety net resonate particularly for the millions of individuals classified as low income or within the vulnerable middle class—many of whom are at risk of falling back below the poverty line without adequate protections.
Despite recent cuts to mortgage down payments and interest rates, along with funding for affordable housing projects, such strategies have not been deemed sufficient to secure a high-growth environment. With increasing reliance on exports to drive growth, potential risks loom large, particularly with uncertainties about higher tariffs on Chinese products following electoral changes within the United States.
Overall, the current state of China’s economy reflects both recovery and caution, underscoring the delicate balance the government must maintain to navigate domestic and international pressures effectively. The next few years will be pivotal as China seeks to bolster growth and stability amid persistent economic hurdles.
