China’s 2024 Economic Roadmap Toward Self-Reliance

Pamir assesses that China’s push to attract more foreign investment continues to jar with the CEWC’s highlighted success in the “drive toward self-reliance” and the Chinese Communist Party’s increasing pressure to limit influential private investors. Foreign entities not deterred by this dichotomy should be aware of the clashing agendas.

China’s annual Central Economic Work Conference (CEWC) held on 12-13 December 2023 analyzed China’s economic situation and concluded that favorable conditions outweighed unfavorable factors in China’s development and that the fundamental trend of economic recovery has a positive long-term outlook. Chinese economic planners pointed to some positive economic developments in 2023:

• The economy continued to grow as it recovers from Covid. 
• Urban unemployment was around 5.2%, 0.4% lower than 2022. 
• Consumer prices remained stable. 
• China had a surplus of more than $200 billion in its international balance of payments in the first three quarters of 2023. 
• China’s exports maintained their 14% global market share. 
• Industrial structure transformation realized major progress with new technology breakthroughs such as in quantum computing.
• Economic security and resilience were consolidated as part of China’s drive toward self-reliance. 
• Essential public services saw improvements.

CEWC acknowledged that China is still at a “critical phase” of its economic recovery from Covid lockdowns and is facing increasing “headwinds” both at home and abroad. CEWC highlighted some domestic and global challenges: 

• Indications point to a lack of effective domestic demand, particularly low consumer consumption and shrinking enterprise investment. 
• Excessive manufacturing expansion of some newly emerging industries, such as electric vehicles, drains resources and creates hostile industry rivalries (“irrational hyper-competitiveness”).
• Risks from systemic crises hang over China’s economy: continued real estate industry decline, expanded local government debt, and potential risks in financial services.
• Geopolitical tensions and military conflicts are on the rise. 
• Global economic growth and trade may not recover to pre-Covid levels.

CEWC called for “steady growth on the basis of maintaining stability” as the guiding principle for China’s economic endeavors in 2024. CEWC decided to continue “proactive fiscal policy” for economic growth with an emphasis on improved quality and efficiency, and “prudent monetary policy” with a focus on supporting technological innovation, green transformation, a digital economy, and small and micro-enterprises.  

In this macroeconomic context, CEWC specified major work for 2024: 

• Continue the technology-driven transformation in China’s industrial system to achieve economic growth in quality. 
• Boost domestic consumption. The government will introduce sales subsidies and reduce bureaucratic and tax hurdles to encourage more consumption. Chinese central bank will further lower interest rates to discourage the stockpiling of savings. According to China’s central bank, saving accounts in China’s banks increased RMB 20.1 trillion in the first half of 2023 — more than half of the growth (RMB 11.91 trillion) was in individual savings accounts.
• Defuse potential systemic crises. The central government released RMB 1 trillion in bonds last October to help local governments ease their debt burdens. It will introduce three programs to rejuvenate the real estate industry through government-subsidized housing, public service infrastructure, and urban slum transformation.
• Maintain export momentum and open more to foreign investments. China will expand exports through third countries/parties, service trade, and cross-border e-commerce. The government will introduce more liberalized policies and improve the business environment to attract and retain foreign investments.

Chinese economists say that China’s ultimate direction for its economic structural transformation is to move away from a model driven by “investment + real estate + exports” to a model driven by “domestic consumption + high-tech manufacturing + carbon neutrality.”