However, this declaration has largely failed to prevent a decline in confidence among the foreign business community, private entrepreneurs, and domestic consumers.
Across China, many foreign companies are struggling to cope amid the gulf between weak business performance and the Chinese government’s rosy economic narrative.
China’s economy is expected to be on solid footing in 2024, but “recovery remains unstable”
China’s economy is expected to be on solid footing in 2024, but “recovery remains unstable”
Instead, issues around national security, data flows, and continued market barriers dominate people’s minds, fueling doubts about increasing investment in China and speculation about exploring opportunities abroad.
“The economic slowdown remains a major concern for our member companies,” Eric Zheng, president of the American Chamber of Commerce in Shanghai, said Tuesday after the 5.2% growth announcement.
He also emphasized the existence of “skepticism” over the accuracy of China’s official statistics, but added, “China remains in the trough of the coronavirus amid severe headwinds, including a struggling real estate sector and wavering confidence.” He may be in the process of recovering from that.”
“A wide range of economic recovery policy measures are critical to boosting the confidence of U.S. businesses in China,” Zheng said.
02:31
China’s GDP: Beijing’s long to-do list for economic growth in 2024
China’s GDP: Beijing’s long to-do list for economic growth in 2024
Meanwhile, many foreign investors say they find it difficult to make money or expand their businesses in China, especially since state-owned rivals have long had better opportunities.
For example, companies with foreign investment, Hong Kong, Macau and Taiwan, reported a dismal 1.4% growth in annual industrial output last year, in contrast to a 5% expansion for state-owned enterprises, according to the National Bureau of Statistics. data.
The 1.4% figure may partly reflect the shrinking industrial presence of foreign companies due to the relocation of production capacity to cheaper regions or home countries, but at the same time It quantifies the decrease in levels and increase in anxiety.
Last summer, debate heated up over China’s economic prospects and whether the country remained investable, especially as trade tensions with the United States intensified.
Amid punitive tariffs that the U.S. government has imposed on Chinese products since 2018, as well as recent technology restrictions, many foreign manufacturers are relocating or considering a Plan B.
“Growth is nothing special”: 7 points to glean from China’s economic data
“Growth is nothing special”: 7 points to glean from China’s economic data
In the third quarter of last year, China also posted its first deficit since 1998 in direct investment debt, a broad measure of foreign direct investment (FDI) that includes the retained earnings of foreign companies in the country. The State Administration of Foreign Exchange announced that the deficit for the July-September period reached $11.8 billion.
“We don’t really care about the actual GDP number, whether it’s 4.2, 5.2 or 6.2. [per cent] “Rather than worrying about the composition,” said a European investor based in China, who requested anonymity because the matter is sensitive. “What we really want is growth in the consumption part of GDP. And unfortunately, that’s not going to work.”
There also appears to be a growing belief among foreign companies, particularly those with a large presence in China, that they need to hedge against China’s slowdown and geopolitical risks.
“[They are] We are considering whether it would be better to place some of our investments (with some diversification) outside of China. I think we’re going to see a real tightening,” the source said.
2024 could be tough as demand is not well sustained
Meanwhile, many foreign companies are making their own assessments of China’s economy, based not only on government-released data but also on frequent industry statistics and chats.
Yang Yeqing, marketing and sales director at the Japanese robot company’s Shanghai office, said he is paying more attention to fixed asset investment figures and trade data.
The company, which makes industrial robots for automakers and construction materials, also had no plans to expand in China this year, citing a slowdown in some business sectors.
“As you can see from these data and statistics, we feel that 2024 could be a tough year because demand, including exports, is not sustained enough,” he said.
China’s real estate investment decreased by 9.6% in 2023, and total exports decreased by 4.6%. However, car sales were a bright spot last year, increasing by 5.6%, according to official data.
Tomoo Marukawa, a professor at the University of Tokyo who specializes in the Chinese economy, said China’s annual growth rate of 5.2% is within the realm of possibility.
Marukawa said this reflects the reality of a bumpy and uneven recovery in many sectors.
Mainly due to the pandemic and corresponding policies over the past few years, the Chinese economy has experienced dramatic fluctuations in annual growth rate, starting from negative growth in the first quarter of 2020, which led to an annual growth rate of 2.2%. , after which it was pushed down to 8.4%. cents in 2021, 3% in 2022, and 5.2% in 2023.
US retail giant Costco reportedly considered a variety of factors, from per capita disposable income to luxury car sales, when choosing where to set up a foothold in China last year.
In Zhejiang, Costco’s China team is said to have evaluated a trove of data passed around by provincial officials responsible for promoting overseas investment, according to Zhejiang media. And the American company commissioned an independent study of local consumer sentiment before deciding on Costco’s fourth and fifth big-box stores in the country to be located in Ningbo and Hangzhou, two of the largest cities in the eastern economic powerhouse. It is reported that.
In 2023, China’s national per capita income was 39,218 yuan (US$5,525), while the corresponding figure for Ningbo and Hangzhou was more than 80,000 yuan (US$11,270).
China’s “era of runaway growth is over”; companies rush to grow overseas
China’s “era of runaway growth is over”; companies rush to grow overseas
Costco currently operates six stores in the wealthier cities of Shanghai, Suzhou, Ningbo, Hangzhou and Shenzhen, with two more stores opening in Nanjing and Guangzhou this year, according to Costco Asia president Richard Zhang. The expansion of the market is attracting attention.
“China remains a key focus and we will use the performance of our first few stores in Shanghai and other selected cities as a yardstick to assess whether to penetrate deeper into the Chinese market,” Zhang said last year. He was reported to have told Shanghai media.
Alex Ma, assistant professor at Peking University School of Government, touched on how foreign investors’ interpretation of China’s economic outlook is influenced by geopolitical and macroeconomic factors.
“China still needs to do more,” he told the paper. “We need to do more than report good economic data. Attracting and retaining foreign investment is critical. [in terms of] Transfer and acquisition of foreign technology and management skills. ”
China’s investment from abroad fell 8% annually to 1.13 trillion yuan last year, amid continued challenges facing foreign companies and weakening ties with the West. However, the Commerce Department has not yet released figures for the US dollar, and it is believed that the weaker renminbi caused an even bigger decline.
Foreign investment represents just 0.9% of the country’s GDP, well below the 2% average over the past decade.
Nevertheless, Ma said foreign enterprises and investments have had a huge positive impact on improving China’s industry and consumption.
In his speech at Davos, Premier Li said that the return on foreign direct investment in China over the past five years was about 9%, making China “quite competitive in global terms.”
Li also vowed to “work tirelessly” to promote a market-oriented, law-based and world-class business environment, expand institutional openness, eliminate access restrictions and shorten the so-called negative list. The government prohibits or restricts foreign investment.
“We will also regularly listen to the opinions of foreign companies and take proactive steps to address their reasonable concerns,” Li vowed.
How such promises play out is sure to be closely watched and scrutinized by those with a stake in China’s economic recovery.