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China’s 2017 Economic Prospects
Text by Huang Hanquan

 

Last year marked the beginning of China’s 13th Five-Year Plan (2016-2020). Amidst domestic worries in various sectors, the Chinese economy made a solid start and continued to contribute positively to world economic growth. In 2017, China will face even more complicated and faster-changing domestic and international situations, with increasing uncertainty. Against this backdrop, whether China can maintain its comparatively high economic growth rate of more than 6.5 percent has become a question of global interest.

2016 Economic Performance

To address the serious issues and domestic problems plaguing China’s economy, the government adapted to the new normal of economic development in 2016, committed to a new innovative, coordinated, green, open and shared development model, and pushed supply-side structural reform to successfully meet major projected goals for economic growth and set a solid foundation for accomplishing the building of a moderately prosperous society in all respects.

The economy operated within an appropriate range, as manifested in “four stabilities and one decline.” The first stability was growth. China’s GDP growth rate in the first three quarters of 2016 averaged 6.7 percent, as did the projected annual growth rate. The figure landed right in the middle of the economic goal of 6.5 to 7 percent set in early 2016, indicating that China’s economy will now grow in an L-shaped path. The second stability was employment. The first three quarters of 2016 witnessed the creation of 10.67 million urban jobs, which met the annual goal of 10 million ahead of schedule. This figure was expected to surpass 13 million by the end of 2016. The third was stability of commodities prices. In 2016, China’s commodities prices rose around the start and end of the year, but stayed low at other times. The Consumer Price Index (CPI) from January to November increased 2.2 percent on a year-on-year basis, lower than the control objective of 3 percent. The fourth was the stability in consumption. The country’s total retail sales of consumer products from January to November 2016 increased 10.4 percent year-on-year, slightly lower than the growth rate of the same period in 2015. China has become the world’s second-largest consumer market and facilitates the greatest total volume of e-commerce in the world. The one decline refers to both exports and imports. From January to November 2016, China’s total volume of imports and exports dropped 1.2 percent year-onyear, with exports falling by 1.8 percent and imports by 0.3 percent. The drop tended to narrow month by month.

Economic quality and efficacy improved, as well as corporate performance. From January to November in 2016, the added value of industrial enterprises above a designated size increased by 6.2 percent on a year-on-year basis. The coal industry saw profits double in 2016. The iron and steel industry reaped profits of more than 30 billion yuan in 2016 after a deficit of over 50 billion yuan in 2015. In September 2016, the Producer Price Index for Industrial Products (PPI) turned positive and has since increased month by month, reaching 3.3 percent in November. With PPI turning positive for the first time in 54 months, the Chinese economy has avoided deflation.

The economic structure has been upgraded. Since 2010, the growth rate of China’s service sector has surpassed that of industry. In 2013, the service sector’s share of China’s national economy first surpassed that of the secondary industry, promoting the transformation of the economic structure from investment and exportdriven to consumption-driven, and of the industrial structure from industry-dominated to service-sector-dominated. In the first three quarters of 2016, final consumption contributed 71 percent of economic growth, up 13.3 percent over the same period of 2015. After structural adjustment, the proportions of the three industries in relation to the total economy are 8.5, 39 and 51.5, respectively.

The pace of change of economic growth engines is accelerating. In 2016, traditional industries, including iron and steel, coal, nonferrous metal, building materials and petrochemicals, continued to see declining growth rates. Emerging industries such as high-end equipment, robotics, energy conservation, environmental protection, new energy automobiles, and new internet operational models and service industries such as healthcare, senior care, tourism, culture and sports are developing at breakneck speed. In the first three quarters of 2016, the added value of strategic emerging industries as well as new and high technology industries increased by more than 10 percent, four percentage points higher than the industrial growth rate. More than 4 million enterprises were registered in the first three quarters of 2016, an increase of 27 percent on a year-on-year basis. The majority of these enterprises are in service industries such as data delivery, software, information services, finance, culture, sports, entertainment, education, health, and social work.

 

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