China’s economic trajectory in 2024 is marked by a complex interplay of cyclical and structural dynamics, posing challenges to the attainment of its official growth and employment objectives. Amidst global headwinds, including geopolitical tensions and a significant property downturn, alongside internal shifts towards a service-oriented, high-value-added production economy, China is deploying fiscal and monetary measures to pursue its targets of approximately 5 percent GDP growth and the creation of over 12 million new jobs.
The focal point of China’s economic strategy lies in its dual ambitions for GDP expansion and employment generation. This reflects not only the imperative of providing opportunities for graduates but also signals China’s evolution from a manufacturing-centric economy to one characterized by a burgeoning services sector and high-value production.
This transition, a typical hallmark of economies approaching upper middle-income status, traditionally leads to job creation, given the labor-intensive nature of the service sector. While the advent of artificial intelligence introduces potential shifts in the capital-labor dynamic, its transformative impact remains nascent, leaving the conventional trajectory of deindustrialization largely intact.
Notably, despite revising down its GDP growth target from 6-6.5 percent in 2019 to approximately five percent in 2024, China concurrently elevated its employment growth projection from 11 million to over 12 million over the same period. This recalibration underscores China’s confidence in sustaining employment growth even amidst a decelerating GDP growth trajectory, a trend anticipated as countries progress towards upper middle-income status and exhaust their catch-up growth potential.
However, assessing China’s true growth potential presents a formidable challenge, exacerbated by cyclical factors stemming from the fallout of the 2008-2009 global financial crisis. The COVID-19 pandemic and a concurrent property market downturn further compounded the cyclical downturn, amid persisting geoeconomic tensions and regulatory interventions across sectors like property, online education, and healthcare.
Distinguishing cyclical fluctuations from underlying structural slowdowns remains elusive, with geopolitical frictions potentially impeding China’s technological advancement and the property downturn exerting prolonged adverse effects on GDP. Yet, amidst this complexity, China’s monetary policy aims to provide moderate support, exemplified by the central bank’s reduction of the five-year loan prime rate to alleviate mortgage burdens. Fiscal stimulus, envisaged through a 7.8 percent increase in government spending, is poised to bolster growth further.
Despite the intricacies of the economic landscape, China’s proactive policy stance signals intent to leverage fiscal measures to achieve its growth objectives. While the interplay of cyclical and structural factors poses uncertainties, China’s pursuit of monetary and fiscal support positions it favorably to meet its 2024 GDP growth and employment targets, barring unforeseen shocks in the challenging macroeconomic milieu of the world’s second-largest economy.