Zhong Yiwending: "Achieving 5% Growth, Fiscal Expansion is Key"

Weak Consumption Outlook This Year... Investment Must Increase to Offset
Especially Manufacturing and Real Estate Investment Limits... Focus on Infrastructure Investment

Yu Yongding, a leading Chinese economist and academic committee member of the Chinese Academy of Social Sciences, argued that the key to achieving this year's economic growth target of around 5.0% is concentrated investment through expansionary fiscal policy. Since a rapid recovery in consumption is difficult to expect, active fiscal input from the government is necessary to offset related sluggishness.

On the 7th, Yu Yongding stated in an interview with China’s First Financial Newspaper regarding the Chinese government’s GDP growth target of around 5.0% this year, "Although the Chinese economy faces many challenges and uncertainties, if the government implements expanded fiscal spending, national bond issuance, infrastructure investment support, and expansionary monetary policy, the target is achievable."

Yu explained, "Last year, consumption contributed up to 82.5% to economic growth due to the base effect from the previous year and revenge consumption. However, this year, the consumption growth rate is expected to decline to some extent, and it can be assumed to align with GDP growth at around 5%." He added, "Regarding exports, based on forecasts from international economic organizations, the situation could worsen. Therefore, the trade surplus growth rate this year can be assumed to be zero." He emphasized, "Ultimately, to offset the GDP growth slowdown caused by the decline in final consumption growth, the investment growth rate must be significantly increased. The key question is how to raise it."

According to the National Bureau of Statistics, China’s national fixed asset investment growth rate reached 30.1% in 2009 but has since declined repeatedly to 3% in 2023. Yu stressed, "If the investment growth rate continues to decline and other factors (consumption) remain unchanged, China’s potential economic growth rate decline is inevitable. Therefore, investment must be prioritized."

Yu particularly emphasized the importance of infrastructure investment. According to his explanation, the National Bureau of Statistics announced that last year the total fixed asset investment nationwide reached 50 trillion yuan (approximately 919.6 trillion won), but it did not disclose the proportions of manufacturing, infrastructure, and real estate investments. Yu’s estimates place these at approximately 50.5%, 20.4%, and 29.1%, respectively.

Regarding this, he said, "Compared to the previous year, the proportion of manufacturing increased, real estate decreased, and infrastructure increased but at a smaller margin than manufacturing. Infrastructure investment can be used as a policy tool to supplement insufficient aggregate demand and also affect economic growth rates." He further explained, "If the manufacturing investment growth rate decreases and real estate investment continues to record negative figures, infrastructure investment will be the key factor determining China’s overall investment growth rate this year."

Additionally, he noted, "Whether we can find efficient and high-quality projects for infrastructure investment is a question we need to study. Projects such as highways and high-speed railways may be saturated, but there is ample room to increase investment in sponge cities (a Chinese government policy concept for urban water resource management strategies aimed at flood prevention, response, and water resource circulation in urban areas), green energy, aviation, healthcare, and elderly care sectors."

This content was produced with the assistance of AI translation services.