Employees work on the assembly line of a carmaker in Qingdao, Shandong province. [Photo by Zhang Jingang/for chinadaily.com.cn] 

Experts say consumption will remain primary driver of economy in 2024

China's economy is set to maintain robust and steady growth in 2024 as domestic demand further recovers, driven by ramped-up macroeconomic policy support and the deepening of industrial upgrading, senior experts said.

Consumption will remain a primary growth driver this year, while the investment outlook is expected to improve, countering potential lingering pressures on exports, they said.

Wang Yiming, vice-chairman of the China Center for International Economic Exchanges, said consumer spending is poised to further expand this year, building on the post-COVID rebound in 2023. In the first three quarters of last year, consumption accounted for 83.2 percent of the nation's economic growth.

Supporting the continued recovery in consumer spending would be the acceleration of new forms of consumption, including in the digital economy, green industries, healthcare and smart homes, said Wang, who is also a member of the Monetary Policy Committee of the People's Bank of China, the country's central bank.

Traditional consumption areas such as vehicles and electronics are also expected to see a resurgence as a stabilizing economy boosts people's incomes and expectations, he said, adding that policy initiatives would also promote the recovery.

"I believe there is scope for intensifying fiscal policy support," Wang said, adding that the central government may moderately increase debt levels and implement structural tax cuts as its leverage ratio remains relatively low compared with other major economies.

The efforts to promote a modern industrial system would help form a virtuous cycle between consumption and investment, while the country's increasingly diverse export markets and emerging export advantages in new energy sectors will help offset lukewarm global demand, said Zhang Xiaoqiang, executive vice-chairman of the China Center for International Economic Exchanges.

"China has the capacity to achieve economic growth around 5 percent in 2024 while maintaining the momentum of high-quality development," said Zhang, who is also a former deputy head of the National Development and Reform Commission.

The tone-setting Central Economic Work Conference, which was held in December, highlighted expanding domestic demand as a focus in 2024, calling for efforts to intensify macroeconomic policy adjustments, tap consumption potential and expand effective investment.

China's economy staged a rebound last year as activity normalized from disruptions caused by the COVID-19 pandemic, and it expanded by 5.2 percent in the first three quarters, yet supply has recovered faster than demand, making insufficient demand a weak link of the economy.

Mostly dragged by the decline in new market orders, the country's official purchasing managers index for the manufacturing sector fell to 49 in December from 49.4 in November, indicating that factory activity has contracted for the third consecutive month, the National Bureau of Statistics said on Sunday.

Lan Zongmin, a researcher at the Development Research Center of the State Council, said the Chinese economy is likely to see a more balanced recovery between supply and demand this year as policymakers attach more emphasis to bolstering demand, with the deepening of industrial upgrading to further anchor investment growth.

Infrastructure investment in the areas of technological advances and carbon reduction will likely speed up, and manufacturers' equipment upgrade and growing capacity in emerging industries would bolster investment in the sector, Lan said, adding that investment activity in the real estate sector is projected to stabilize.

In an article published on Monday in Qiushi Journal, the flagship magazine of the Communist Party of China Central Committee, the leading Party group of the National Development and Reform Commission vowed to enhance the efficiency of government investment to support areas such as transportation infrastructure, energy, coordinated regional development and the modern industrial system.

China's retail sales, a gauge of consumption, have rebounded since August and rose by 10.1 percent year-on-year in November, while investment lagged behind as total fixed-asset investment expanded by 2.9 percent year-on-year in the first 11 months of 2023 due to a slump in real estate development, according to the NBS.

With more macroeconomic policy support likely, China's A-share market rallied at the end of 2023, led by the new energy and electronics sectors, with the benchmark Shanghai Composite Index up by three consecutive days to 2,974.93 points as of Friday's close, the last trading session of 2023.