GDP Expands 5.2% in 2023 – Analyzing China’s Key Economic Indicators

China’s GDP in 2023 beat government growth targets thanks to a strong performance in the last three quarters. Data released from the statistics bureau show a rebound in the industry and services sectors, as well as a resurge in consumption in the second quarter. Weaker areas of the economy, such as foreign trade and private investment, also showed signs of improvement in the fourth quarter. We look at China’s full-year economic indicators and discuss the country’s development trajectory in the post-COVID era.

China’s GDP in 2023 has beaten targets, growing at a rate of 5.2 percent year-on-year at constant prices, reaching a total of RMB 126.06 trillion (US$17.52 trillion) according to estimates from China’s National Bureau of Statistics (NBS).

Economic indicators released by the NBS show a year of strong growth, with core segments of the economy, such as industry, manufacturing, services, and consumption indicating a strong recovery following the lifting of COVID-19 restrictions at the beginning of the year.

Weaker areas of the economy have also begun to show signs of improvement at the end of the year, with the growth in foreign trade and private sector investment accelerating in December 2023.

Economic growth in 2023

Total GDP in the fourth quarter increased by 5.2 percent year-on-year to reach RMB 34.79 trillion (US$4.88 trillion). On a quarterly basis, GDP grew by 1 percent in the fourth quarter.

The added value of China’s tertiary sector (services) recorded the highest growth rate among the three industry segments, up 5.8 percent year-on-year to reach RMB 68.8 trillion (US$9.65 trillion). Meanwhile, the added value of the secondary sector (industry and manufacturing) grew by 4.7 percent and the primary sector (agriculture and raw material extraction) increased by 4.1 percent from 2022.

China’s disposable income per capita also saw healthy growth in 2023, reaching RMB 39,218 (US$5,451), a real increase of 6.1 percent after accounting for price factors.

Wages accounted for 56.2 percent of disposable income, with overall per capita wage income increasing by 7.1 percent to reach RMB 22,053 (US$3,093). The median per capita disposable income was RMB 33,036, an increase of 5.3 percent year-on-year.

Industry and manufacturing

Over the whole of 2023, the added value of industry above the designated size (companies with an annual main business income of over RMB 20 million (US$2.8 million) increased by 4.6 percent year-on-year. In December 2023, industrial added value saw a real increase of 6.8 percent year-on-year.

The added value of the equipment manufacturing industry increased by 6.8 percent year-on-year, 2.2 percentage points faster than the overall industrial added value growth rate. Meanwhile, the added value of the mining industry increased by 2.3 percent year-on-year, the manufacturing industry increased by 5 percent year-on-year, and the electricity, heating, gas, and water production and supply industry increased by 4.3 percent year-on-year.

Renewable energy-related products had a particularly good year, with several product segments, such as solar cells, new energy vehicles, and generator sets (power generation equipment), experiencing double-digit growth:

• The added value of solar cells increased by 54 percent year-on-year,
• The added value of NEVs increased by 30.3 percent year-on-year; and
• The added value of generator sets increased by 28.5 percent year-on-year.

The traditional manufacturing segments of automotive and electronics production continued to maintain strong growth throughout the year, despite a slight deceleration in December.

State-owned enterprises (SOE) and joint-stock enterprises experienced the strongest growth in terms of added value, while private and foreign-invested companies (FIEs) experienced slower growth:

• SOEs increased by 5 percent year-on-year;
• Joint-stock enterprises increased by 5.3 percent year-on-year;
• Foreign, Hong Kong, Macao, and Taiwan-invested enterprises increased by 1.4 percent year-on-year; and
• Private enterprises increased by 3.1 percent year-on-year.

However, looking at December, we can see that activity among FIEs and private companies picked up at the end of the year:

• The added value of foreign, Hong Kong, Macao, and Taiwan-invested enterprises increased by 6.9 percent year-on-year;
• The added value of private enterprises increased by 5.4 percent year-on-year.

Services

The annual added value of the service industry increased by 5.8 percent in 2023 from the previous year.

Service sectors that were strongly impacted by the COVID-19 pandemic began to recover in earnest in 2023. The added value of the hospitality and catering industry, for instance, grew 14.5 percent year-on-year thanks to the lifting of COVID-era restrictions and a low base effect from 2022.

The added value of several other core service sectors also experienced rapid growth:

• Information transmission, software, and information technology (IT) services grew 11.9 percent year-on-year;
• Leasing and business services grew 9.3 percent year-on-year;
• Transportation, warehousing, and postal services grew 8 percent year-on-year;
• Financial services grew 6.8 percent year-on-year; and
• Wholesale and retail services increased by 6.2 percent year-on-year.

Between January and November 2023, the operating income of service industry enterprises above the designated size increased by 8.5 percent year-on-year. Among them, the operating income of the culture, sports, and entertainment industry, information transmission, software, and IT services, and leasing and business services increased by 18.9 percent, 12.8 percent, and 12.7 percent respectively.

Consumption and inflation

The total retail sales of consumer goods in 2023 reached RMB 47.15 trillion (US$6.6 trillion), an increase of 7.2 percent over the previous year. In December 2023, total retail sales reached RMB 4.36 trillion (US$611.6 billion), a year-on-year increase of 7.4 percent.

Merchandise sales, meanwhile, increased by 5.8 percent year-on-year in December to RMB 41.86 trillion (US$5.87 trillion). In December, merchandise sales grew by 4.8 percent year-on-year, decelerating from 8 percent growth in November.

Merchandise sales in brick-and-mortar retail outlets have rebounded in 2023, benefitting from the return on in-person shopping. Merchandise sales at department stores, convenience stores, specialty stores, and branded stores grew by 8.8 percent, 7.5 percent, 4.9 percent, and 4.5 percent respectively compared with the previous year.

Merchandise sales of supermarkets, however, decreased by 0.4 percent year-on-year, despite the lifting of COVID-19 restrictions. By comparison, online sales of food grew by 10.8 percent year-on-year in 2023, suggesting that competition from online retailers is beginning to bite.

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Despite the return of in-person shopping, the growth of online merchandise sales still outstripped sales at physical stores. Total online merchandise sales in 2023 reached RMB 15.44 trillion (US$2.2 trillion), an increase of 11 percent over the previous year. Among them, online merchandise sales of physical goods reached a total value of RMB 13.02 trillion (US$1.8 trillion), up 8.4 percent from 2022, accounting for 27.6 percent of the total retail sales of consumer goods. Online sales of physical goods, food, clothing, and household goods increased by 11.2 percent, 10.8 percent, and 7.1 percent year-on-year respectively.

Despite strong retail sales, inflation remained low in China over the year, with the Consumer Price Index (CPI) rising by just 0.2 percent year-on-year, indicating weak demand.

Falling pork prices – the most heavily weighted product in the CPI food basket – may also help to explain the low inflation recorded in 2023. Following years of sky-high prices due to outbreaks of African swine fever among China’s hogs, oversupply in 2023 led prices to fall 13.6 percent.

Various products recorded slow CPI growth or even declines in 2023:

• Food, tobacco, and alcohol prices increased by 0.3 percent;
• Clothing prices rose by 1 percent;
• Housing prices remained unchanged;
• Household goods and services prices increased by 0.1 percent
• Transportation and communication prices fell by 2.3 percent
• Education, culture, and entertainment prices rose by 2 percent
• Healthcare prices increased by 1.1 percent; and
• Other goods and services prices rose by 3.2 percent.

Investment

Fixed asset investment (FAI) in 2023 reached RMB 50.3 trillion (US$7.1 trillion), up 3 percent over the previous year.

Of this, FAI in the manufacturing industry increased by 6.5 percent year-on-year, while infrastructure investment (excluding electricity, heating, gas, and water production and supply industries) increased by 5.9 percent.

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FAI in the secondary industries as a whole saw robust growth of 9 percent from the previous year, reaching RMB16.2 trillion (US$2.3 trillion). However, tertiary industry investment grew just 0.4 percent year-on-year to reach RMB 33.1 trillion (US$4.6 trillion).

Private FAI in 2023 contracted by 0.4 percent year-on-year, reflecting the slow recovery of the private sector. Despite this, the rate of decline narrowed by 0.1 percentage points in the January to December period from the January to November period. FAI by SOEs, on the other hand, grew by 6.4 percent year-on-year.

Meanwhile, FAI by domestic enterprises increased by 3.2 percent compared to the previous year, while FAI by foreign enterprises increased by 0.6 percent and FAI by Hong Kong, Macao, and Taiwan-invested business enterprises decreased by 2.7 percent year-on-year.

Foreign trade

China’s foreign trade has experienced meager growth in 2023. While the year got off to a strong start, with total trade volume rising by 4.8 percent year-on-year in the first quarter, the full-year growth slowed to just 0.2 percent. Total foreign trade reached RMB 41.76 trillion (US$5.86 trillion), with exports growing 0.6 percent to RMB 23.77 trillion (US$3.3 trillion), and imports decreasing by 0.3 percent to RMB 18 trillion (US$2.5 trillion).

High inflation and a cost-of-living crisis in key overseas markets – above all, the US and Europe – have reduced demand for imported Chinese goods in 2023, while domestic demand for imported goods has remained lackluster.

However, the December figures indicate that things may improve for the better in 2024. The total import and export volume in December increased by 2.8 percent year-on-year, with exports rising 3.8 percent and imports rising 1.6 percent.

Trade with the EU and the US also showed signs of improvement in the fourth quarter, according to officials from China’s General Administration of Customs. Annual imports and exports with the EU and US reached RMB 5.5 trillion (US$771.5 billion) and RMB 4.67 trillion (US$655 billion), accounting for 13.2 percent and 11.2 percent respectively. Meanwhile, bilateral trade with Latin America and Africa increased by 6.8 percent and 7.1 percent year-on-year respectively.

Moreover, private enterprises appear to have bucked the trend in 2023, recording a growth rate of 6.3 percent from 2022. Private companies also accounted for 53.5 percent of total imports and exports, an increase of 3.1 percentage points from the previous year.

The foreign trade figures also show that China continues to dominate in certain key export sectors, in particular mechanical and electrical products, as well as new technologies such as NEVs.

Exports of machinery and electronic products accounted accounting for 58.6 percent of the total export value, while exports of labor-intensive products accounted for 17.3 percent.

Within the field of machinery and electronic products, the export of electric passenger cars, lithium-ion batteries, and solar cells reached a combined export value of RMB 1.06 trillion (US$148.7 billion), breaking the trillion-yuan mark for the first time and growing 29.9 percent from 2022. Exports of ships and household appliances also increased by 35.4 percent and 9.9 percent year-on-year respectively.

2024 outlook

On the back of strong growth in the latter three quarters of 2023, China beat its own growth target of “around 5 percent” and met most third-party projections. This growth has been primarily driven by the strong performance of industrial and service sectors, as well as public investment.

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China Industries to Watch in 2024

Moreover, it is significant that weaker areas of the economy have continued to improve in the final few months of the year. The course reversal of foreign trade in November and December, for instance, may signal further improvement going into 2024.

Moreover, following a slow recovery in the first half of the year, the government took steps to boost the performance and confidence of private companies and FIEs. Positive data from November and December indicates that these efforts are paying off and may continue to improve in 2024.

Many analysts agree that maintaining this level of growth in 2024 will not be easy, not least because the strong performance of 2023 will create a high base effect for economic indicators in the coming year (conversely, 2023 numbers benefitted from the lower numbers in 2022).

As such, the government is expected to keep expanding support for public infrastructure investment through the use of various policy and fiscal tools to stimulate economic activity. Further efforts are also expected to boost the private sector, attract more foreign investment, and expand domestic demand.

China’s GDP growth target along with overarching economic targets and policy direction for 2024 will be determined in the Two Sessions in March. The government has also provided a roadmap for development during the Central Economic Work Conference held in December 2023.

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