SCIO briefing on China's economic performance in 2024

Reuters:

Could you share your outlook for China's economic development in 2025? With potential export headwinds this year, how can domestic demand, particularly consumption, be stimulated? Also, I'm interested in the analysis of potential growth rate — what's the current approximate level, and what are the trends going forward? Thank you.

Kang Yi:

Let me first address your question about the potential growth rate. The potential growth rate is a research concept that reflects economic growth capacity. Different scholars reach varying estimates based on their methods and assumptions. The consensus from recent studies by various organizations and scholars indicates that China's current potential economic growth rate remains at a medium-to-high level. Different institutions and scholars use varying methods and parameter settings, resulting in inconsistent estimates. Overall, the Chinese economy maintains a medium-high potential growth rate.

Now, let me address the outlook for 2025. China's 14th Five-Year Plan concludes in 2025. While adverse effects from external environment changes may intensify, the Chinese economy maintains stable foundations, multiple advantages, strong resilience and significant potential. The fundamental conditions and trends supporting long-term growth remain unchanged, as does the momentum for high-quality economic development. Favorable conditions continue to outweigh unfavorable factors, with timing and momentum remaining advantageous for development. We remain confident about China's economic development in 2025. This confidence is derived from the following factors:

First, there is a solid foundation for sustained economic improvement, with positive factors for economic development continuing to accumulate. In 2024, the journey of economic development was extraordinary. The economy showed a significant rebound in the fourth quarter, with market vitality and expectations steadily improving. Positive factors driving sustained economic improvement continued to accumulate, laying a solid foundation for economic growth in 2025. China is a super-large economy with substantial economic scale and market capacity. It possesses a complete industrial system and strong support capabilities. Both supply and demand can sustain the domestic economic cycle, providing fundamental support for steady, long-term development. For example, let's look at some production metrics. In 2024, more than 80,000 vehicles and 3.4 million smartphones were produced daily, with over 470 million packages delivered each day. Such figures clearly demonstrate the vibrant vitality of China's market.

Second, momentum exists for sustained economic improvement, as new growth drivers and advantages continue to strengthen. China is currently in a critical period of transitioning from old to new growth drivers. Some traditional drivers, such as real estate, are weakening, and their share of the national economy is declining. However, emerging growth drivers, particularly the digital economy, are showing robust growth. Their share continues to increase, creating new opportunities and expanding possibilities for China's development. In 2024, the real estate sector's value-added contribution to GDP was 6.3%, down 0.5 percentage points from 2023. Data for China's digital economy in 2024 has not yet been released. In 2023, the digital economy's value-added contribution reached 31.8% of GDP, up 1.3 percentage points from 2022. Of this, the share of core digital industries in GDP rose to 9.9%, a 0.5 percentage points gain from 2022. The digital economy's share will continue to grow in 2024, having already become a new engine driving China's economic development.

Third, sustained economic growth remains well-supported, as the effects of policy packages continue to strengthen. In particular, the Central Economic Work Conference diagnosed and prescribed solutions for current major issues, setting a clear direction for economic work in 2025. The policy orientation is explicit: to promote sustained economic recovery and growth while continuously raising people's living standards. In response to the complex changes in the external environment and insufficient effective domestic demand, the top priority for 2025's economic work is expanding domestic demand broadly, particularly consumer spending. This brings us to the reporter's question about boosting consumption. The Central Economic Work Conference clearly proposed special initiatives to boost consumption, strengthen the implementation of policies for large-scale equipment renewal and consumer goods trade-ins, and increase support for projects involving national strategic priorities and key security capabilities. The implementation of these policies will effectively unlock domestic demand potential, particularly consumer spending, providing stronger momentum for steady economic growth this year.

Fourth, the momentum for continued economic improvement remains strong, with deepening reform and opening up set to enhance development vitality. Reform and opening up is the source of vitality for China's contemporary development and progress, and a crucial key to keeping pace with the times. The third plenary session of the 20th CPC Central Committee proposed more than 300 reform measures. The Central Economic Work Conference explicitly called for resolutely advancing reform and expanding opening up to address deep-seated obstacles and external challenges that constrain development. The implementation of these reform measures will further liberate and develop productive forces, and stimulate and enhance economic vitality.

It is also important to note that 2025 is the final year for completing the 14th Five-Year Plan. As all sectors aim for their targets and focus on implementation, major strategic tasks and significant engineering projects will be fully realized, generating stronger momentum for economic development. China has rich experience in macroeconomic regulation, Chinese enterprises are daring and enterprising, and Chinese people are hardworking and intelligent. These factors enable us to respond to risks and challenges with greater confidence as we promote high-quality development. Next, through reforms and policies, we must fully unleash development potential, achieve high-quality completion of the 14th Five-Year Plan's goals, and lay a solid foundation for the 15th Five-Year Plan.

Thank you.