Other BriefingsChina’s January – February 2024 Economic Roundup
Data from China’s statistics bureau show strong economic activity in the first two months of the year, with an uptick in consumption, growth in industrial output, and a recovery in foreign trade. At the same time, some areas of the economy continue to stagnate, with low inflation and growth in private investment indicating weak demand and business confidence. We look at the latest economic figures to discuss what they mean for China’s economy in 2024.
China’s economy continued to recover in the first two months of 2024, recording strong figures across industrial and services output and a significant recovery in foreign trade.
The latest economic indicators released by the National Bureau of Statistics (NBS) on March 18 provide insight into the development trajectory of China’s economy and society after reopening following the COVID-19 pandemic.
Speaking at a press briefing on March 18, NBS spokesperson Liu Aihua said of the economy that “the quality of development continues to improve, the economy has started smoothly, and the upward trend has continued.”
China’s GDP grew at a rate of 5.2 percent year-on-year in 2023, and the government has set a target of “around 5 percent” for 2024.
Below we look at the latest economic indicators to discuss the performance and development trajectory of China’s economy in 2024.
Strong growth in industrial and manufacturing output
In the first two months of 2024, industrial added value (of companies with an annual main business income of over RMB 20 million (US$2.78 million)) grew by 7 percent from the same period in 2023, and at a slight acceleration of 0.2 percentage points from December 2023. In February, industrial added value grew 0.56 percent from the previous month.
Among the sectors that experienced the fastest growth was the manufacturing of consumer products, which increased by 4.7 percent year-on-year, an acceleration of 4.4 percentage points from December. Meanwhile, the added value of high-tech manufacturing increased by 7.5 percent year-on-year, up 1.1 percentage points from December.
Foreign and private companies also experienced healthy growth during this period. The value added of foreign companies (including Hong Kongese, Macanese, and Taiwanese companies) in the industrial sector increased by 6.2 percent year-on-year, while domestic private companies grew by 6.5 percent year-on-year.
Among the most successful products were 3D printers, with an increase in output of 49.5 percent year-on-year, charging stations (up 41.8 percent year-on-year), and electronic components (up 41.5 percent year-on-year).
Services and consumption continue to expand
In January and February 2024, the national service industry production index increased by 5.8 percent year-on-year. Various sectors recorded substantial increases, including hospitality and catering (12.1 percent year-on-year), information transmission, software, and IT services (10.4 percent year-on-year), finance (8.2 percent year-on-year), and wholesale and retail services (7 percent year-on-year).
The service business activity index grew to 51 percent in February, up by 0.9 percent from January, indicating an expansion. Sectors such as road and air transportation, catering, monetary and financial services, environmental protection and public facilities management, and culture, sports, and entertainment – all recorded a business activity index of above 55 percent.
Retail sales of consumer goods grew by 5.5 percent year-on-year to RMB 8.13 trillion (US$1.13 trillion) in the first two months of 2024. However, retail sales in February grew only by an incremental 0.03 percent from January.
Meanwhile, online retail sales saw a significant rebound, increasing by 15.3 percent year-on-year to reach a total of RMB 2.15 trillion (US$298.64 billion). Online sales of physical accounted for 84.5 percent of total online sales and 22.4 percent of total retail sales.
Meanwhile, services consumption in the first two months also expanded, buoyed by the Chinese New Year (CNY) holiday, which started on February 10. In January and February, service sales grew by 12.3 percent year-on-year, 7.7 percentage points faster than the growth of merchandise sales.
The effect of the CNY holiday can be seen in areas such as catering, with revenue in this sector increasing 12.5 percent year-on-year. There were also a total of 2.29 billion cross-regional trips made during the holiday period, while domestic tourists spent a total of RMB 632.69 billion (US$87.88 billion) on travel. This is an increase of 47.3 percent from the previous year’s holiday, indicating a significant recovery in holiday economic activity and spending compared to the previous year.
Fixed asset investment rises, but private, foreign investment remains low
Fixed asset investment (FAI) in the first two months of 2024 reached RMB 5.08 trillion (US$705.62 billion), up 4.2 percent year-on-year, 1.2 percentage points faster than the full-year growth rate in 2023. FAI in February grew by 0.88 percent from January.
FAI in the secondary sector saw the highest growth rate, increasing by 11.9 percent year-on-year to reach RMB 1.58 trillion (US$219.47 billion) in January and February. FAI in the primary sector fell by 5.7 percent year-on-year, while in the tertiary sector, it grew by 1.2 percent year-on-year.
The industries that saw some of the highest growth in FAI were manufacturing, which increased 9.4 percent year-on-year, and infrastructure, up 6.3 percent year-on-year.
Within the tertiary sector, FAI in the railway transportation industry saw a major acceleration, increasing by 27 percent year-on-year.
While overall FAI grew at a healthy rate, FAI in the private sector increased by just 0.4 percent year-on-year in January and February, compared to 7.3 percent in the public sector, indicating a continued imbalance between company spending. Meanwhile, FAI by foreign companies continued its downward trajectory, declining by 14.1 percent year-on-year.
Foreign trade recovers while foreign investment continues to fall
Foreign trade experienced a major improvement in the first two months of the year, increasing by 8.7 percent from the same period in 2023 to reach RMB 6.61 trillion (US$918.14 billion). This is the fastest growth rate recorded since April 2023. However, it is important to note that trade in January and February 2023 fell by 0.8 percent year-on-year, creating a low base effect that positively impacted this year’s growth rate.
Of the total trade in January and February, exports increased by 10.3 percent for a total of RMB 3.75 trillion (US$520.88 billion), while imports grew 6.7 percent year-on-year to RMB 2.86 trillion (US$397.26 billion).
China’s foreign trade stagnated in 2023 amid low domestic and international demand, with the full-year trade growth rate reaching just 0.2 percent year-on-year. Despite this, trade figures improved in the last few months of 2023, and the positive growth rate at the beginning of this year indicates that foreign trade is continuing to recover.
Data from China’s General Administration of Customs (GAC) released earlier in March shows trade with some major trade partners began to grow again in January and February 2024 after experiencing a contraction in 2023. With some other parties, the contraction persisted but narrowed. For instance:
- Total merchandise trade with ASEAN countries grew 4.8 percent year-on-year in the January-February period, recovering from a contraction of 4.8 percent in 2023;
- Total merchandise trade with EU countries fell by 4.1 percent in the January-February period but narrowed from a contraction of 7.1 percent in 2023; and
- Total merchandise trade with the US grew by 0.7 percent year-on-year in January and February, recovering significantly from a fall of 11.6 percent in 2023.
Meanwhile, data released by the Ministry of Commerce (MOFCOM) released in February shows that the actual use of foreign capital in January fell by 11.7 percent year-on-year, reaching a total of RMB 112.71 billion (US$15.66 billion). Foreign investment in China dropped precipitously in 2023, falling by 8 percent year-on-year from 2022. However, January 2023 saw relatively high levels of foreign capital, creating a high base effect that negatively affected this year’s figures. On a month-by-month basis, foreign investment in January 2024 increased by 20.4 percent.
Moreover, in January 2024, foreign investors invested in and established 4,588 new foreign-funded enterprises (FIEs) in China, a year-on-year increase of 74.4 percent, indicating that conditions have improved for foreign company establishment.
The Chinese government has been striving to improve confidence among foreign companies and attract more foreign investment to the country, with a new action plan released on March 19, 2024.
Prices increase for first time in six months, driven by holiday demand
China’s Consumer Price Index (CPI) in February increased by 0.7 percent year-on-year, up from a contraction of 0.8 percent in January. This records the first CPI increase since August 2023, when the CPI increased by 0.1 percent.
Looking at specific categories, in January and February, food, tobacco, and alcohol prices dropped by 1.9 percent, clothing prices increased by 1.6 percent, housing prices increased by 0.3 percent, education, culture, and entertainment prices increased by 2.6 percent, and healthcare prices increased by 1.4 percent year-on-year.
Within food, tobacco, and alcohol prices – pork prices dropped by 9.1 percent tea, fresh fruit by 6.6 percent, and fresh vegetables by 5.1 percent year-on-year, while grain prices increased by 0.4 percent year-on-year.
Core CPI excluding food and energy prices rose by 0.8 percent year-on-year, with a 1.2 percent increase in February, expanding by 0.8 percentage points compared to the previous month.
China has been struggling with low levels of inflation and deflation amid weak demand since reopening after the COVID-19 pandemic. CPI in February is likely to have been spurred by increased demand and spending activity during the CNY holiday. In the 2024 Government Work Report released during the Two Sessions, the Chinese government targeted to increase consumer prices by about 3 percent in 2024. In order to achieve this, significant measures to improve consumer confidence and stimulate consumption will be required.
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