No. 46 | China's 2024 Economic Outlook


Originally published January 11, 2024, in Chinese on the ACCEPT website. Translated by ACCEPT.


The 46th Tsinghua University Forum of China and the World Economy

On January 8, 2024, the 46th Tsinghua University Forum of China and the World Economy was broadcasted online under the theme of China's 2024 Economic Outlook. The biannual event was held inside the Weilun Building's main lecture hall on campus at Tsinghua University and hosted by  the Academic Center for Chinese Economic Practice and Thinking (ACCEPT), a research institute under the School of Social Sciences at Tsinghua University. Forum participants included David Daokui Li, Director of Tsinghua ACCEPT and Co-President of the Society for Government and Economics (SAGE); Yin Yanlin, Vice Chairman of the Economic Committee for the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) and former Deputy Director of the Office of the Central Financial and Economic Affairs Commission; Wang Fan, Chancellor of the China Diplomatic Academy and President of the China Foreign Affairs University; Sun MaosongExecutive Deputy Director of Tsinghua University's Institute for Artificial Intelligence and Professor at Tsinghua University's Department of Computer Science and Technology; David Qingzhong Pan, Executive Director and Professor of Schwarzman College at Tsinghua University; Xu Gao, Chief Economist and Assistant President of the Bank of China International Co., Ltd. and Adjunct Professor of the National School of Development at Peking University; Lu Ting, Managing Director and Chief China Economist at Nomura Holdings, Ltd.; Ren Zeping, Economist and Founder of Zeping Macro, former Vice President and Chief Economist of China Evergrande Group, and former Economist of the Development Research Center of the State Council; and Vincent Tianquan Mo, Managing Director of the China Index Academy, Chairman of Pukai Energy, and Founder and former Executive Chairman/Chief Executive Officer of Fang (SouFun) Holdings Ltd.. Li Ke'aobo, Executive Deputy Director of Tsinghua ACCEPT, presided over the event as forum moderator. 

During the proceedings, Li Bing (top-right), Lu Lin (center-right), and Guo Meixin (bottom-right), researchers at Tsinghua ACCEPT, jointly released the institute's latest China Macroeconomic Analysis and Forecast Report entitled Steady Transformation and Forward Progress: China's 2024 Economic Outlook


In reference to the current overall situation for China's economy, the report pointed out that the untapped potential for China's economic development remains enormous, which is one aspect that cannot be easily overlooked. The long-term growth prospects for China's economy are in turn largely determined by underlying supply and demand fundamentals. On the demand side, there is still considerable room for China's continued urbanization process, the internal  movement of rural migrants, and increases to residents' incomes, all of which will promote the sustained growth of consumer demand in the future; while on the supply side, China's economy has significant advantages in terms of its national savings rate, capacity for scientific and technological innovation, and the accumulated sum of total human resources. According to Tsinghua ACCEPT's estimates, if China is able to make the most of these advantages, the projected growth rate for the country's economy during the periods from 2021-2025, 2026-2030, and 2031-2035 can potentially reach as high as 6%, 5.8%, and 5.2%, respectively. 

At present, prices in China are stagnant, the Prosperity Index continues to hover at a low level, the economy's ability to absorb employment is showing signs of weakness, and the rate of economic growth has fallen below its potential. The report stresses that even without taking into account the impact of the COVID-19 pandemic, China's GDP growth rate had already been declining by an average of 0.33 percentage points per year during the period from 2010 to 2019, indicating that a long-term trend of sustained one-way decline in economic growth had already taken shape. At the current moment, therefore, many issues facing China's economy represent issues that have been amassed over a long period of time, and cannot simply be attributed to factors such as the pandemic, the real estate sector, local government debt, or private enterprises, among other factors. 


Since the beginning of the new era, the focus of China's efforts in the area of national policy has been to pursue greater regulation in response to the social and economic problems that have emergedduring the course of the country's rapid economic development, including striving for a rules-based order and social stability. During this process, macroeconomic policy should be used to actively hedge against the contractionary effects to economic activity that arise from such regulatory changes. However, problems such as formalism, bureaucratism, and a proclivity to exempt oneself from taking on responsibilities have long remained prominent concerns, which has resulted in economic and governance policies that taken together contribute to the amplification of contractionary effects. In order to fundamentally solve the problems facing China's economy, it is necessary at present to undergo a reorientation in our standpoint, as our approach to macroeconomic policy must be harmonized with and adapt to the new pattern of national governance, with macroeconomic policy shifting from preventing overheating to preventing overcooling. According to the report, slogans such as high-quality development is of overriding importance, consolidating stability through progress, establishing the new before abolishing the old and incorporating non-economic policies for a consistent evaluation of the orientation for macroeconomic policy, among others, as put forward at the Central Economic Work Conference in December 2023 have provided clear signals for the country's future development, emphasizing the broader society's wishes to continue pursuing economic growth, and indicating that the central government will move to implement a more proactive economic development strategy.

Finally, the report summarized seven major issueswith regard to China's economic development that are in urgent need of resolution as follows: 

1. The situation in the real estate market remains very grim; 

2. The historical contribution of local government debt cannot be denied, but its excessive burden must be alleviated; 

3. The confidence and vitality of the private economy are both seriously deficient; 

4. The two main risks in the field of scientific and technological innovation: the strangleholds over energy security and artificial intelligence; 

5. The gap between the macroeconomic data and microeconomic perceptions in terms of consumer confidence; 

6. The inability to unleash the full potential of urbanization, which severely restricts the expansion of demand capacity in the domestic economy; 

7. China must not be a passive participant on the international arena, but should proactively get involved in its management. 

Next, David Daokui Li summarized the report and called attention to three of its key findings:

First, China at present is still a maturing economy with enormous potential. Some international observers outside of the country believe that China's economy has already peaked, while others have even compared China's economy with that of the former Soviet Union during the period of Leonid Brezhnev in the 1970s and with that of Japan in the 1990s, both of which are erroneous comparisons.

Second, the problems that China's economy now faces cannot simply be attributed to the pandemic nor to other apparent issue areas such as local government debt, the real estate sector or the private sector. Instead, the fundamental obstacle that is in need of being urgently resolved is that in recent years the constant emphasis on well-regulated and orderly social governance has objectively had a strong contractionary effect on economic development. As a consequence, the orientation of macroeconomic policy must be readjusted in a timely manner to offset this effect, shifting the focus from preventing overheating to preventing overcooling. 

Third, the Central Economic Work Conference held in 2023 clearly pointed to a readjustment in positioning wherein development is treated as a matter of overriding importance, stability is ensured through the forward momentum of progress, and new foundations are put into place before moving away from the old. As for 2024, if relevant policies can overcome the tendency towards inertia, and if all the necessary readjustments are enacted accordingly and implemented in an efficient manner, China's economy can look forward to a reversal of the continuous trend of declining growth that has characterized the past decade. In 2023, GDP grew by about 4.5% in line with actual conditions in the broader economy, unlike the roughly 5.3% growth achieved in 2022, which on the face of it appeared higher as a result of a low base effect. Hence, the question of whether or not China's economy can reach a growth rate of 5% in 2024 is within the bounds of expectations.

Next, the forum moved onto a roundtable discussion with Li Ke’aobo moderating the exchange between distinguished guests.

[1] Wang Fan views the ongoing conflict between Russia and Ukraine, which continues to this day, as not only having had a serious impact on the two countries themselves, but meanwhile also propelled a profound transformation of the overall geopolitical landscape in Europe. By supporting Ukraine, the United States is attempting to achieve multiple goals, including replacing the Russian regime, maintaining American hegemony, and establishing a “new Cold War” pattern on the European continent. However, despite the United States having reaped some benefits in the hot war between the two sides, the Russian regime has not wavered, but has instead become more stable. In addition, major European countries such as Germany are now seeking energy independence, moving to decouple from Russia and deepen ties with the U.S. These changes have not only had a far-reaching and thoroughgoing impact on today’s international relations, but moreover point to the future direction for the overall geopolitical landscape. Given that the future international situation will remain full of uncertainties, all countries will therefore need to continue working together to find amicable solutions while promoting world peace and development. 

Wang pointed out that in today's international environment, opportunities and challenges coexist together. U.S. moves to alter the rules of international trade and its actions against China in the high-tech sector have given rise to new challenges, while uncertainties in relations with the region of Southeast Asia have continually escalated. Moving forward, China needs to strengthen its cooperation with Latin American countries, promote the diversification of international currency and increase the channels for engaging in cooperation. At the same time, it is also necessary to continue building on the BRICS platform and promote more extensive forms of international cooperation so as to better cope with changes in the external environment.

[2] David Qingzhong Pan revealed that according to aggregate data on the two-way movement of international travelers last year, China witnessed a total of around 123 million outbound trips in the first three quarters of 2023, despite only receiving 10.9 million inbound trips during the same period, thus underscoring the need to strengthen international exchanges.

When it comes to the economy and international trade, Pan observed that Chinese enterprises are currently accelerating their plans for overseas expansion and actively exploring opportunities abroad for investment and development cooperation: first, for those companies concentrating on Latin America as well as other countries and regions, there are enormous prospects to begin replacing traditional consumer goods with the latest more advanced products, such new energy and electric vehicles; second, countries in the Middle Eastern region, such as the United Arab Emirates, offer a favorable business environment as well as preferential policies for enterprises and a convenient immigration system for travelers, all of which make it much easier for private firms to take advantage of opportunities; and third, in Kenya and other countries in the African region, state-owned enterprises continue to engage in the construction of infrastructure while private firms moreover contribute to the development of corresponding industries, both of which very much complement one another. 

On the issue of China-U.S. competition in science and technology, Pan commented that although there exists a gap between the two countries on balance, China has made the most of its own steadfast efforts and a sense of urgency to narrow the gap. At present, China's greatest advantage centers on the level of practical application, while it will take a certain period of time before the country can catch up at the level of foundational advancements in science and technology; meanwhile, the U.S. advantage lies in its favorable system for promoting scientific and technological development, including its triad of stable investment, talent and tax policies, along with other factors contributing to a friendly entrepreneurial environment. China has a huge pool of high-skilled workers, which means that as long as a similar system can be put into place, the country will be able to enjoy enormously bright prospects for its scientific and technological innovation moving forward.

[3] Ren Zeping summarized the successful experiences of Chinese enterprises that have expanded into markets overseas into three points: first, is the enterprising spirit and the hard-work mentality of the entrepreneurs; second, their strong advantages in terms of supply chains and the commanding cost performance of their products; and third, the launch of new varieties of consumer goods. To start with, these consumer good varieties can mainly be categorized into either conspicuous consumption or functional consumption: conspicuous consumption is meant to please others' needs, which for the most part refers to luxury goods, while functional consumption is meant to satisfy one's own needs, focusing on goods that offer a high cost performance, and those goods that are enjoyable, good-looking, and easy to use, which are typically targeted towards a younger group of consumers. 

Ren explained that the current overall environment facing China can mainly characterized by way of the following two distinctive features: first, globalization is now facing headwinds, with the world's demand for goods “Made in China” having therefore undergone a contraction, resulting in the scaling down of production capacity, and with overseas expansion meanwhile having become a critical alternative growth channel; and second, the era of China's rapid economic growth and large-scale real estate development benefited from the baby boom and the    urbanization of large numbers of migrant workers in the 1960s and 1970s. China's current urbanization rate is 66%, and there is still room for a further increase of 10-15 percentage points in the future, although this process has slowed down to a great extent. As far as the second point is concerned, Ren believes that the issue concerning the mismatch between residents and geography in the economy can be solved. Onward migration to metropolitan areas is a common phenomenon observed in developing countries everywhere around the world. Urban communities are more dynamic and well-organized, making more efficient use of land and a wide range of other resources. The restrictions placed on the expansion of large cities and the development of smaller and medium-sized cities has to a certain extent led to higher housing prices in first- and second-tier cities as well as the larger inventories in third- and fourth-tier cities. Thus, this issue cannot simply be attributed to inflated housing prices or the public administration of land finance, with land-based finance and capital infrastructure in fact having played a very indispensable role. 

[4] Sun Maosong suggested that although artificial intelligence (AI) has undergone rapid development in the field of human-machine collaboration, and despite the general AI represented by ChatGPT having made breakthroughs in conversational capabilities, language generation, image perception and related areas, there remains significant room for improvement in other use cases. With the continued application and development of AI, relatively rudimentary jobs employing manual labor may eventually be replaced in the future. At the same time, however, higher-end jobs will also become increasingly scarce as a result. Sun further noted that despite the breakneck speed of China’s advancements in AI over the past years as well as its large reserve of well-trained human resources, the country still has yet to provide an adequate response to “Qian Xuesen's Question.” At present, the biggest challenge lies in the ongoing competition between a very small number of top talents, which involves these individuals’ working to come up with original innovations “from zero to one” in the high-tech sector. Chinese postsecondary students are easily constrained by a proclivity towards utilitarianism and realism, and therefore lack the pioneering spirit of those embracing a more idealistic outlook, not to mention also having a knowledge base that is not yet fully formed. Genuine ingenuity requires the establishment of an all-encompassing interdisciplinary foundation when engaging in scholarly learning and research, a requirement that therefore underscores the need to continue carrying out reforms to the education system accordingly.

[5] Xu Gao suggested that weak demand will represent the biggest risk to China's economic operation in 2024. Against the backdrop of frequent bursts of favorable tailwinds from policy moves, and despite strong expectations for policies at the macroeconomic level, the economic growth rate in 2024 is nonetheless projected to reach a level similar to that of 2023, somewhere still in the vicinity of 5%. The problems in the real estate market remain massive, with the underlying driver arising from the fact that China's traditional growth model is now being called into question. As a matter of fact, real estate and infrastructure have undoubtedly been important factors underpinning the success of China's period of reform and opening-up over the past 40 years. This involved local governments borrowing money to build infrastructure and then paying off their debts by selling land, in this way realizing the social benefits of infrastructure investment – a magical formula that proved to be of the essence for China on its way to becoming an infrastructure powerhouse. 

Xu also mentioned that addressing deflationary pressures at present will require measures such as increasing the fiscal deficit and the central bank’s monetization of debt. Financing vehicles for China's local governments can establish investment projects and generate added demand, which would entail the vigorous expansion of local government debt. The country’s domestic demand is insufficient, with domestic production meanwhile facing overcapacity, so there is hence a need to make use of financing platforms to spur on investment activity. During times when consumption is facing a slump, even though the rate of return may not be high, there will still be people willing to invest in infrastructure. Thus, China should make full use of its financing platforms and real estate business model to counter the downward pressure on the economy. 

[6] Lu Ting commented that the economic growth achieved in 2023 was mainly the result of rebounding consumption after the pandemic receded from view. In 2024, however, the driving force behind this “revenge spending” will have already waned, with consumers’ purchasing power meanwhile being significantly impacted by the sluggish growth in household incomes and a pullback in holdings of wealth, especially in terms of real estate and equity investments. At present, the real estate market has fallen into a depressed state and may continue to deteriorate further in the future, which is especially true of third-, fourth- and fifth-tier cities, where the problem of guaranteeing the on-time delivery of housing units remains severe. This situation is not only affecting the real estate market itself, but is also putting pressure on local government finances. In addition, changes in the international economic environment also pose an important source of potential risk. While economic growth in the U.S. and Japan exceeded expectations in 2023, global economic growth is expected to slow significantly in 2024, and most especially in developed countries, which could have a negative impact on China’s exports. Furthermore, prices in the “new three” sectors (i.e., electric vehicles, new energy batteries, and photovoltaics) have fallen sharply over the past year, indicating potential over-investment in these sectors and the emergence of yet another issue. 

When taking a broad-based view of the future, Lu supports the view that the Chinese government needs to put forward more effective measures in the current post-pandemic era in order to solve the problems associated with the real estate sector and local government finances. At the same time, external communications with the outside world is also an extremely critical task for respective government ministries, departments and agencies: given that the international environment after the pandemic is one where foreign investors are willing to invest in China and yet also remain concerned about the impact on their investment returns given the potential for policy changes. 

[7] Vincent Mo Tianquan insisted that real estate has always been an important asset class for both the country as a whole as well as individual households, and despite the ups and downs in its market performance, he believes that in the main there are still tremendous opportunities. Thus, the overall state of the real estate industry should not be brought into doubt only because of short-term fluctuations in market valuations, with the downward readjustment in first-tier cities having already run its course. The current market slowdown is not entirely due to a lack of demand, but instead a result of certain policy restrictions and issues with the development models employed by real estate companies. In any case, when it comes to first-tier cities and some second-tier cities, the market fundamentals remain healthy. In the future, however, it will be necessary to prioritize the central government’s near-term policy proposals, such as those measures concerning affordable housing, the renovation of urban villages, and the construction of "dual use" facilities, among other provisions, with the government's active support expected to give rise to new development opportunities for the country’s real estate market.

In the interactive session at the end of the forum, the roundtable guests also entered into an in-depth and lively exchange with members of the audience, discussing multiple topics of current interest, such as the benefits of certain policy changes, fiscal and tax reforms, the demographic situation, the rigid demand for real estate properties, and new regulations regarding investment and financing, among other trending questions.