Steady growth with quality improvement is China's focus

Despite tough external challenges and huge pressure on domestic economic transformation, China’s gross domestic product (GDP) rose by 6.6 percent in 2018, amounting to just over 90 trillion yuan, or $13 trillion.

Although the growth rate was the lowest in the last two decades, it was still the highest among the top five economies of the world. The additional GDP created in the year by China was more than $1 trillion, which was larger than the size of the world’s number 15 economy, contributing about 30 percent of the global GDP growth. Measured in current prices in 2018, China’s per capita GDP was $9,700, demonstrating the country’s ability to escape the so-called middle-income trap if this level of economic expansion is to be sustained for another three to five years.

Steady growth and continuing progress in structural transformation are two main policy objectives of the Chinese government. Structural transformation aims to improve the quality of growth and to sustain long-term economic prosperity. The shares of the first and secondary industries, i.e., agriculture and manufacturing, in the national economy continue to contract, whereas that of the tertiary industry continues to expand. In 2018, for example, the services industry accounted for 52.2 percent of China’s GDP, up by 0.3 percent points, compared to 7.1 percent for agriculture and 40.7 percent for manufacturing. Moreover, domestic consumption played an ever more important role in sustaining economic growth, enabled by more employment and rising people’s incomes.

The improvement of economic growth quality can be indicated by the following aspects. High-end manufacturing and emerging industries expanded much more quickly than the entire manufacturing sector. Most inland provinces or autonomous regions grew faster than their coastal counterparts, resulting in more regional economic convergence across the whole country. The largest regional economies, such as Guangdong, Jiangsu, Zhejiang, Shandong and Henan, have maintained steady growth, signifying China’s resilience to external shocks and ability to uphold its growth targets irrespective of the on-going trade conflict with the US and the apparent weakening of some major economies in Europe, Latin America and other parts of the world.

In 2018, China’s external trade reached a new high record of $4.62 trillion, growing by 9. 7 percent over the previous year with a trade surplus of $351 billion. The bilateral trade between China and the US was $634 billion, growing by 8.5 percent. The former’s trade surplus with the latter was $323 billion, rising by 17.2 percent. The growth rate of trade between China and the Belt and Road (B&R) economies was 13.3 percent, or 3.6 percentage points higher than the national average.

Both the central and regional governments have paid serious attention to the development of the private economy, encouraging, supporting and guiding private enterprises to create jobs, to invest and to innovate. In 2018, the private sector was responsible for over 90 percent of the country’s new jobs, 48 percent of total exports and over 70 percent of technological innovations. Despite the slowing down of investment growth for the whole country, private investment grew by 8.7 percent, which was 2.8 percent points higher than the national average.

There are two more years left in the 13th Five-Year Plan. China will continue to focus more on steady economic growth, structural transformation and the quality of economic growth. It is expected that the growth target for 2019 and 2020 will still be more than 6 percent. To achieve the set target of growth, China is likely to pay more attention to rural development, to reduce regional economic imbalances, to promote closer ties with the B&R economies, and to upgrade the technological level of the manufacturing sector through encouraging innovation and the development of emerging industries. Significant reduction in taxes and fees as well as financial and monetary relaxations has been implemented to stimulate investment and consumption, particularly for the small and medium sized enterprises.

In the short term, guarding against systematic financial failures, eliminating rural poverty and protecting the natural environment will remain the three most important tasks for all levels of governments. China will also aim to diversify its trade and investment to the B&R economies while cementing its relationship with the traditional major trading partners such as the US, the EU, the ASEAN, Japan and South Korea.

Reform and openness will remain in the center of government policies, but how to deepen reform and increase the efficiency of openness will be the main challenges for China. Given the uncertainty and risk externally, as well as the needs for structural transformation and technological upgrading internally, China will do its best to maintain steady growth of the national economy, ensuring enough job creation and the continuing improvement of people’s livelihood.

The author is a Chueng Kong Special Chair Professor of Economics, Chongqing University, and the University of Nottingham, Ningbo, China.

The opinions expressed here are those of the writer and do not necessarily represent the views of China Daily and China Daily website.