Why this year’s economic growth may be high
China’s tertiary industry, which focuses on service provision, may become the main driving force of this year’s economic growth. The growth of the new economy will also remain rapid and strong.
These two factors, coupled with strong consumer demand, will ensure that China’s economic growth this year will maintain a high level.
Data from the National Bureau of Statistics show that in the first quarter of this year. Value-added industrial output increased by 24.5% year-on-year, and increased by 2% from the fourth quarter of last year. Considering that due to the impact of COVID-19. The base figure for 2020 is very low, so this growth momentum is particularly strong.
In March, retail sales of consumer goods were the main indicator of consumption growth, with a year-on-year increase of 34.2%.
This year’s government work report sets the GDP growth target for 2021 at no less than 6%. From our point of view, this is a prudent and appropriate growth target. Which will promote the country’s sustainable growth in the long term, and it is not difficult to achieve.
The strong economic growth in the first quarter was partly due to a low base in 2020.
It will gradually show a downward trend in the next few quarters.
To reiterate, the tertiary industry or service industry is likely to rebound and become the main driving force of economic growth this year.
Last year, due to the impact of COVID-19, many sectors of the tertiary industry, including retail, transportation and warehousing, showed low growth or even contraction. For example, by 2020, the value-added of retail and wholesale will shrink by 1.3%. While the value-added of accommodation and catering services will shrink by as much as 13.1%.
By effectively curbing the COVID-19 situation. these industries are likely to show a strong recovery momentum and have a lot of room for growth. Therefore, they will become an important growth driver this year.
An important phenomenon to pay attention to is that last year, the added value of high-tech manufacturing, information transmission, software and information technology service industries grew faster. In particular, the growth rate of the information transmission, software and information technology service industries reached 13.2% in the first quarter of 2020. Maintained quarterly growth, with the overall growth rate for the year reaching 16.9%.
The development of high-tech manufacturing has also shown a similar momentum. It is worth mentioning what role these two departments will play this year. We believe that these industries, known as emerging industries and new economies, will make a huge contribution to this year’s economic growth.
From the demand side, consumer demand will be released. It is expected that this year’s consumption growth will be strong. In the first half of 2020, COVID-19 caused a significant reduction in consumer activity. Throughout 2020, the contribution of consumption to the economy has fallen by 0.5%.
During 2016-19 (this is the main part of the 13th Five-Year Plan period (2016-20).
The average annual contribution rate of consumer demand to economic growth was 61.1%. This means that more than 60% of economic growth driven by consumer demand, and the remaining 40% is driven by investment.
In other words, the potential of China’s consumer demand is still relatively large.
The recently announced Fourteenth Five-Year Plan (2021-25) attaches great importance to demand-side management. It emphasizes the leading role of the domestic cycle and the new dual-cycle development paradigm. With the effective control of epidemics and the rapid promotion of vaccines, offline consumption is rapidly recovering, and consumer demand may resume its main role in stimulating economic growth this year.
At the same time, we believe that investment demand will remain stable, and exports may show strong growth in the first half of this year.
Although the central government has made it clear that “policy will not change suddenly,” investment this year will continue to effectively promote economic growth.
From January to March, my country’s exports were 4.61 trillion yuan, a year-on-year increase of 38.7%. Imports were 3.86 trillion yuan, a year-on-year increase of 19.3%. The trade surplus was 759.29 billion yuan, a year-on-year increase of 690.6%.
With the effective domestic control of COVID-19 and the development of the overseas pandemic. The export growth in the first half of this year will continue to be strong.
The author of this article is a professor at the School of Economics and Management, Tsinghua University, Beijing. He is also the former deputy director of the National Bureau of Statistics. These opinions compiled from his speech in the first quarter of the China Macroeconomic Forum.