Chinese Expert: "5% Growth This Year Easily Achievable... Demand Shortage Is the Biggest Issue"

China is expected to smoothly achieve its 5% economic growth target this year, but the current biggest obstacle, the demand shortage issue, may take about two years to resolve.

On the 29th, Zhu Baoliang, Chief Economist at the China National New-type Industrialization Center (SIC), said this at the 'Recent Economic Conditions and 2024 Economic Outlook' forum hosted by the Korea Institute for International Economic Policy (KIEP) Beijing Office.

On the 29th, Zhu Baoliang, Chief Economist at the National New Infrastructure Center (SIC), gave a keynote presentation at the "Recent Economic Conditions and 2024 Economic Outlook" forum held at the Marriott Hotel in Chaoyang District, Beijing, hosted by the Korea Institute for International Economic Policy (KIEP) Beijing Office. (Photo by Hyunjung Kim)

The chief economist stated, "China's economic growth target for this year is 5%, and there should be no major problems achieving this," adding, "The growth rate in the second quarter will increase compared to the previous year, and although it will slow down in the third and fourth quarters, it will remain relatively stable."

He identified the most significant factor hindering China's economic development as the 'lack of effective demand.' He explained, "The employment pressure on the youth is high, household savings have increased, and loan consumption has decreased," noting, "The marginal propensity to consume of households in 2023 is 0.683, which is lower than in 2019 (0.701)." He continued, "The real estate market remains sluggish, and the cycle of 'poor sales → difficulty in fund recovery → difficulty in obtaining loans → lack of willingness to sell land → decrease in new construction starts → reduction in investment' has not yet been broken," warning, "The real estate market has entered a deep adjustment phase, and detaching the economy from the influence of real estate will be a painful process."

He also pointed out, "Housing inventory in the core real estate sector of demand remains massive, so it will take at least two more years for real estate companies to recover from negative growth," and forecasted, "Infrastructure construction is also difficult for local governments to lead, so support from the central government is necessary, and it will take time to resolve."

Additionally, he cited other problems existing in the economic development process, including ▲ management difficulties of private enterprises ▲ overlapping risks among real estate, local government debt, and small to medium financial institutions ▲ and the expansion of uncertainties in the global economy.

He predicted that the 20th Central Committee of the Communist Party of China’s 3rd Plenary Session (3rd Plenum), scheduled for July, will focus on deepening reforms and opening in key areas, social security issues, income distribution, and tax policy.

He added, "It is urgent to organize the tax items that the central and local governments will collect," explaining, "Although it is time to collect consumption tax, it will be difficult to do so within five years because related items need to be organized and double taxation issues with existing tax items must be resolved."