Market demand in China sees no ceiling: Expert
China Economic Net
Beijing: Zhang Liqun, Research Fellow of Department of Macroeconomic Research, Development Research Center of the State Council (DRC), has challenged the so-called ‘China peak theory’, which suggests that a slowdown in economic growth implies that China’s economy has reached its zenith. “Beyond meeting basic needs, the Chinese populace aspires to enhance their living standards. There is no ceiling to this, so is it to the market demand in China,” Zhang told China Economic Net (CEN).
Zhang underscored the robust material and technological base of the Chinese economy, its plentiful factor supply, and the vastness of its domestic market. “With the ongoing shifts in economic structure, China harbors significant growth potential,” he remarked. In 2023, China’s economic output reached a new milestone, with its Gross Domestic Product (GDP) soaring past 126 trillion yuan. This represents a remarkable doubling from the 56.8 trillion yuan recorded a decade earlier in 2013. Similarly, the per capita disposable income climbed to 39,218 yuan, more than doubling from the 2013 figure of 18,311 yuan. Notably, China’s growth rate of 5.2 percent outpaced major economies, including the United States at 2.5 percent, the eurozone at 0.5 percent, and Japan at 1.9 percent. Continuing to contribute over 30 percent to global economic growth, China solidifies its role as a pivotal driver of the world economy.
While China’s GDP growth stood at 10.3% in 2010, it dwindled to 5.2 percent in the previous year. Some say, China’s economy “peaks”. In response to the ‘China collapse theory’ and ‘China peak theory’, Zhang posited that such a reduction in growth rate has prompted erroneous analyses of China’s economic trajectory, particularly those employing the production function approach (PFA). In economics, a production function relates physical output of a production process to physical inputs or factors of production, but Zhang criticized this reliance on supply-side theory, which he deems fundamentally flawed due to its disregard for the critical role of demand in economic growth. “An analysis that solely focuses on supply factors and conditions is inherently incomplete and lacks comprehensiveness,” Zhang elucidated. He explained that the observed downturn in China’s economic growth rate stems from a contraction in demand. “Amidst a century of unprecedented global changes, the world economy has continued to struggle, leading to a significant and sustained decline in external demand for China. Additionally, the unbalanced development within China, such as the uneven progress in urbanization, has also contributed to a decrease in the pace of investment growth,” he noted. However, the burgeoning needs of China’s vast population are expected to catalyze robust and accelerated growth in production supply capabilities and more comprehensive employment opportunities. This dynamic will likely establish a high-level equilibrium where demand stimulates supply, and supply, in turn, generates demand, Zhang pointed out.
“The challenges confronting China’s economy today are rooted in the persistent contraction of demand over the past several years, not a transformation in the fundamental conditions of the economy,” Zhang explained. The National Bureau of Statistics of China on March 18 reported that the national economy remained stable and exhibited growth in the initial two months of the year. Notably, industrial enterprises above a designated size saw a 7.0 percent year-on-year increase in total value added; retail sales of consumer goods also rose, reaching RMB 8,130.7 billion, a 5.5 percent increase from the previous year; fixed asset investment, excluding rural households, climbed to RMB 5,084.7 billion, up 4.2 percent YoY; the total value of imports and exports of goods was RMB 6,613.8 billion, marking an 8.7 percent year-on-year growth. These figures underscore the sustained and balanced expansion of China’s economy.
 “High-quality development in China is not synonymous with low growth. While we prioritize developmental quality and the expansion of new productive forces, we must also sustain a swift pace to ensure comprehensive employment and diverse payment opportunities. Thus, a balanced enhancement in both quality and quantity is essential for an accurate comprehension of China’s pursuit of high-quality development,” Zhang said.
