Abstract: In 2023, while there were structural highlights in China's economic operation, issues like insufficient effective demand and weak expectations remained prominent, leading to a discrepancy between macroeconomic data and micro entities’ perceptions. Since the third quarter of 2023, measures such as the optimization of the real estate sector and additional issuance of 1 trillion yuan in government bonds have boosted confidence. Looking ahead to 2024, a rough estimate suggests that China's GDP growth rate could reach 5%. It is expected that the contributions of final consumption and net exports to GDP growth in 2024 will likely be lower than in 2023, leaving capital formation the main factor determining whether a higher economic growth rate can be achieved.
The key to China's macroeconomic policy in 2024 should be to significantly increase the fiscal deficit ratio and expand the scale of government bond issuance to provide sufficient funds for broad infrastructure investment. The challenge the Chinese economy is facing is not an either-or between cyclical problems and structural problems, but rather what kind of macroeconomic policies to implement and what kind of economic structural reforms to undertake. For China, maintaining an inflation rate of 3%-4%, or even slightly higher, is deemed appropriate.
