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China’s gross domestic product grew 5.2 per cent in 2023 while its population dropped for the second year in a row as the world’s second-largest economy grappled with a property slowdown and deflationary and demographic pressures.
The GDP figure was equal to a forecast of 5.2 per cent from an analyst poll by Reuters and exceeded the government’s official target of around 5 per cent. It also outpaced growth of just 3 per cent in 2022, when the economy was hit by Beijing’s draconian zero-Covid restrictions.
But analysts said the data release on Wednesday highlighted the challenge for President Xi Jinping, who began an unprecedented third five-year term in power last year, in engineering a stronger economic recovery in 2024.
The National Bureau of Statistics said investment in property development fell 9.6 per cent last year compared with a year earlier, while new home prices in December declined 0.4 per cent on the previous month, the sharpest fall since February 2015.
Chinese equities lost ground following the data release. The Hang Seng China Enterprises index in Hong Kong declined as much 3.1 per cent to be down about 10 per cent this month, while the Hang Seng Mainland Properties index fell 4.5 per cent. The CSI 300 index of Shanghai- and Shenzhen-listed stocks shed 1 per cent.
China’s population fell by 2mn people to 1.4bn, statistics showed on Wednesday, as the 11mn deaths recorded outstripped 9mn births. The country’s population declined for the first time in 60 years in 2022, falling by 850,000, a trend that demographers forecast will continue as China rapidly ages.
“The world is experiencing an unparalleled change marked by the rapid decline of China’s population,” said Yi Fuxian, an expert on Chinese demographics, adding that the “bleak” economic outlook would weigh on any measures to tackle the “demographic crisis”.
The population decline has roots in a 1980s policy that restricted most couples to one child, well below the average of 2.1 needed for a population to remain stable. The national death rate was 7.87 per 1,000 people in 2023, the highest since the early 1970s, and up from 7.37 last year.
China’s premier Li Qiang on Tuesday pre-empted the official data release, announcing the headline GDP growth figure at the World Economic Forum in Davos.
Li attributed the growth to policymakers’ focus on “strengthening the internal drivers” rather than unleashing massive stimulus as China’s economy emerged from pandemic controls.
Economists said the annual growth figure was probably flattered by as much as 2 percentage points because of a comparison with low growth during the pandemic in 2022. They suggested policymakers would need to do more this year to stabilise the property market and drive up consumption to help alleviate deflationary pressure.
In the fourth quarter, GDP was 1 per cent higher compared with the third quarter, and up 5.2 per cent year on year compared with analyst expectations of 5.3 per cent in a Reuters poll.
In 2023, fixed-asset investment excluding rural households was up 3 per cent over the previous year, with investment in infrastructure 5.9 per cent higher and manufacturing up by 6.5 per cent. Private investment fell 0.4 per cent, though excluding real estate it grew 9.2 per cent, the NBS said.
Investment in areas earmarked by Beijing as strategic grew faster. Investment in manufacturing of aerospace vehicle and equipment, for example, grew 18.4 per cent.
Retail sales, a gauge of consumption, in December rose 7.4 per cent year on year, compared with analyst expectations of 8 per cent and 10 per cent growth in November, while industrial output in December grew 6.8 per cent against a year earlier, above expectations of 6.6 per cent.
Analysts said it was not clear whether officials planned a more comprehensive programme to stabilise market expectations. Beijing signalled late last year that it was prioritising growth and security over reform at the annual Communist party central economic work conference.
“Recent speeches by China’s top leaders seek to triangulate the message that the economy is on the right course and no panicky stimulus measures are needed but [that] the government still understands the concerns of businesses and households and stands ready to act if needed,” said Eswar Prasad, a senior fellow at the Brookings Institution think-tank.
But the GDP data, along with other recent indicators, reveal an economy that is experiencing “at best subdued growth characterised by weak domestic demand and persistent deflationary pressures”, he added. “It seems premature to say the economy is out of the woods.”
Risks still abound in financial markets, the property sector and local government debt, which in addition to the unfavourable demographics would weaken investor sentiment, Prasad said.
Last year, about 90 per cent of foreign inflows to China’s stock market reversed, spurred by mounting doubts about Beijing’s willingness to take larger-scale measures to boost growth.
