China’s GDP Expands 5% in H1 2024

China’s GDP expanded by 5.0 percent during H1 of 2024, aligning with the economic target set at the beginning of the year. Despite challenges in the real estate market and sluggish domestic demand, robust performance in key manufacturing and service sectors, along with better-than-anticipated foreign trade, played a significant role in driving overall growth. In this article, we delve into the latest economic indicators and explore China’s growth prospects for the remainder of 2024.

China’s economy has demonstrated a solid start in 2024, with 5 percent year-on-year growth during the first half of the year, in line with the annual growth targets. This positive performance can be attributed to strong showings in the industrial and services sectors, despite encountering various challenges. Recent economic data released by the National Bureau of Statistics (NBS) indicates expansion in several key areas, including industrial output and foreign trade.

That said, however, the second quarter of 2024 presented a more complex picture. GDP growth slowed to 4.7 percent year-on-year, down from 5.3 percent in the first quarter. To maintain momentum and achieve its whole year growth goal, analysts believe China needs a more comprehensive and robust policy support package.

China’s economy and society in H1 2024 at a glance (yearly growth rates):

• GDP: RMB 68 trillion (US$8.49 trillion), +5.0%
• Value added of industrial enterprises above the designated size*: +6.0%
• Value added of services: +4.6%
• Total retail sales of consumer goods: RMB 23,596.9 billion (US$3,246.9 billion), +3.7%
• Total import and export: RMB 21,168.8 billion (US$2,912.8 billion), +6.1%
• Fixed asset investment: RMB 54 trillion (US$3.44 trillion); +3.9%
• Disposable income per capita: RMB 20,733 (US$2,907); +5.4%
• Unemployment rate: 5.1%; -0.2%
• CPI: 0.1%

*Added value of companies with an annual main business income of over RMB 20 million (US$2.8 million)

China H1 2024 GDP growth

China’s GDP in the first half of 2024 reached RMB 61.68 trillion (US$8.49 trillion) according to data from the NBS. This represents an increase of 5 percent year-on-year. In Q2 2024, China’s GDP grew at 4.7 percent. On quarterly basis, the country’s Q2 economy expanded by 0.7 percent from the first quarter.

The secondary industry (industry and manufacturing) saw the highest growth rate, increasing 5.8 percent year-on-year. The tertiary sector (services), meanwhile, grew 4.6 percent year-on-year while the primary sector (agriculture and resource extraction) grew 3.5 percent year-on-year.

Industrial output maintains strong momentum

In the first half of 2024, the added value of industries above the designated size (companies with an annual main business income of above RMB 20 million) saw a robust growth of 6 percent year-on-year. This performance underscores the resilience and steady expansion of China’s industrial sector.

On a monthly basis, industrial output edged up by 0.42 percent in June compared to the previous month. This monthly increase contributed to a notable year-on-year growth rate of 5.3 percent for June. The consistent growth in industrial output highlights the sector’s ability to maintain momentum and adapt to market demands.

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Meanwhile, the added value of manufacturing grew by 6.5 percent year-on-year in the first half of 2024. The added value of equipment manufacturing grew by 7.8 percent year-on-year, and that of high-tech manufacturing increased by 8.7 percent year-on-year accelerating by 1.8 and 2.7 percentage points respectively compared to all industrial enterprises above designated size. Looking at company ownership, in the first half of 2024, the added value of SOEs increased by 4.6 percent year-on-year. The added value of foreign-invested enterprises (FIEs) (including companies from Hong Kong, Macao, and Taiwan) increased by 4.3 percent year-on-year.

Meanwhile, the manufacturing purchasing manager’s index (PMI) was 49.5 percent in June 2024, the same as the previous month. Nevertheless, the enterprise production and operation activity expectation index reached 54.4 percent, a slight 0.1 percentage point increase from the previous month.

By industry, in June, the added value of 35 out of 41 major industries maintained year-on-year growth. Among them:

• Coal mining and washing industry increased by 4.2 percent
• Oil and gas extraction industry increased by 4.4 percent
• Agricultural and sideline food processing industry increased by 0.9 percent
• Wine, beverage and refined tea manufacturing industry increased by 7.2 percent
• Textile industry increased by 5.1 percent
• Chemical raw materials and chemical products manufacturing industry increased by 9.2 percent
• Automobile manufacturing industry increased by 6.8 percent
• Railway, ship, aerospace and other transportation equipment manufacturing industry increased by 13.1 percent
• Electrical machinery and equipment manufacturing industry increased by 4.4 percent
• Computer, communication and other electronic equipment manufacturing industry increased by 11.3 percent
• Electricity, heat production and supply industry increased by 4.1 percent

The service industry continues to recover

In the first half of 2024, the added value of the service industry increased by 4.6 percent year-on-year, a slight deceleration from 5 percent year-on-year in first quarter of 2024.

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The service industries with the highest growth in added value include the information transmission, software, and IT services industry, which increased by 11.9 percent year-on-year, the leasing and business services industry, up 9.8 percent year-on-year, the transportation, warehousing, and postal industry, which grew 6.9 percent year-on-year, and the hospitality and catering industry, up 6.6 percent year-on-year. Finally, the wholesale and retail industry increased by 5.7 percent year-on-year.

From January to May, the operating income of service industry enterprises above the designated size (those with a main annual business income above RMB 20 million) increased by 8.5 percent year-on-year. In June, the business activity index of the service industry was 50.2 percent, while the business activity expectation index reached 57.6 percent, up 0.6 percentage points from the previous month. Among them, the business activity index of postal services, telecommunications, radio, television and satellite transmission services, monetary and financial services, capital market services, and other industries ranged above 55 percent.

Retail sales saw modest growth, while inflation remains moderate

In the first half of 2024, retail sales of consumer goods reached a total of RMB 23.59 trillion (US$3.24 trillion), an increase of 3.7 percent year-on-year. This is a deceleration from 4.7 percent year-on-year growth in the first quarter of 2024, and 8.4 percent year-on-year growth in the last quarter of 2023. Nevertheless, in June alone retail sales was up 2 percent year-on-year.

The vast majority of retail sales were made up of merchandise sales, which reached RMB 20.94 trillion (US$2.88 trillion) in the first half, an increase of 3.2 percent year-on-year.

Meanwhile, catering revenue in the first quarter grew by 7.9 percent year-on-year to RMB 2.62 trillion (US$360.88 billion), a deceleration from the 10.8 percent yearly growth rate registered in the first quarter. In June, catering revenue grew 5.4 percent year-on-year, a slight increase form the 5 percent growth registered in May.

From January to June, online retail sales reached RMB 7.09 trillion (US$976.59 billion), a year-on-year increase of 9.8 percent, slowing from 12.4 percent from January to June. Among them, online merchandise sales reached RMB 5.95 trillion (US$819.57 billion), an increase of 8.8 percent year-on-year, accounting for 25.3 percent of total merchandise sales (online and offline).

Inflation in China continues to remain low due to a combination of weak domestic demand and strong supply-side output. In June 2024, the monthly inflation rate in China ranged at 0.2 percent compared to the same month in the previous year. Inflation peaked at 2.8 percent in September 2022, but has since progressively eased. The annual average inflation rate in China ranged at 0.2 percent in 2023.

In the first half year, the consumer price index (CPI) rose by 0.1 percent year-on-year, while the index in the first quarter was flat year-on-year, according to the NBS.

Various products saw price decreases, including:

• Food, tobacco, and alcohol decreased by 1.4 percent; of which:
  • Fresh fruits fell by 7.8 percent
  • Pork remained unchanged
  • Fresh vegetables fell by 2.7 percent
• Transportation and communication decreased by 0.7 percent

Meanwhile, other products saw modest increases in CPI:

• Clothing increased by 1.6 percent
• The price of housing increased by 0.2 percent
• The price of daily necessities and services increased by 0.9 percent
• The price of education, culture, and entertainment increased by 2 percent
• Medical care increased by 1.4 percent

Core CPI, which excludes food and energy prices, rose 0.7 percent year-on-year.

Foreign trade grows on surplus

In the first half of 2024, China’s total imports and exports reached RMB 21.17 trillion (US$2.9 trillion), a 6.1 percent increase year-on-year, surpassing RMB 21 trillion for the first time.

Monthly trade volumes from January to June were robust, consistently exceeding 3.5 trillion yuan since March, with May peaking at RMB 4.06 trillion (US$559.09 billion). Exports particularly flourished, growing by 8.6 percent year-on-year in June to US$308 billion, marking the fastest growth print since March 2023 and surpassing market expectations.

Specifically:

• Auto exports surged by 18.9 percent in value and an impressive 25.3 percent in volume, driven by lower export prices. This growth was partly attributed to a front-loading effect as exporters aimed to get ahead of impending auto tariffs from the EU and the
• Household electronics also saw a notable increase, with sales climbing by 14.8 percent in value and an even faster volume growth of 24.9 percent.
• The semiconductor sector experienced robust growth as well, with exports rising by 21.6 percent in value and 9.5 percent in volume. This strong performance in semiconductor exports indicates that China’s push for self-sufficiency in technology and its pivot towards high-tech manufacturing are beginning to yield positive results.

Notably, the export growth of high-tech products, mechanical and electrical items, cars, and ships is outperforming the traditional low value-added products that China excelled in during the past decades.

Cumulatively, the export value for the first half of the year rose by 3.6 percent, a significant recovery from the -3.2 percent recorded in the same period in 2023.

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China expanded its trade relations with key partners, notably the ASEAN region, which emerged as China’s largest trading partner with a total trade value of RMB 3.36 trillion (US$462.7 billion), up 10.5 percent year-on-year, accounting for 15.9 percent of China’s total foreign trade. Trade with the United States and South Korea also saw notable increases, reaching RMB 2.29 trillion (US$315.35 billion) and RMB 1.13 trillion (US$155.59 billion), respectively.

Various types of enterprises contributed to this trade growth. Private enterprises led with an 11.2 percent rise in imports and exports, totaling RMB 11.64 trillion (US$1.56 trillion) and comprising 55 percent of China’s total foreign trade. Foreign-invested enterprises saw a modest increase of 0.2 percent, while state-owned enterprises experienced a 1.2 percent growth year-on-year.

China’s H1 economic performance analysis

In summary, the first half of 2024 marked a period of economic slowdown in China, primarily driven by prolonged difficulties in the property sector and heightened job security concerns, which subdued domestic demand. Second-quarter GDP growth fell short of expectations and declined from the previous quarter.

Key economic indicators presented a mixed performance. Industrial output in June surpassed earlier forecasts but showed a slight decrease compared to May. Retail sales growth in June was notably below anticipated levels and decreased from the previous month. Fixed asset investment for the first half of the year met expectations, while property investment faced significant challenges with a sharp decline.

Analysts highlighted concerns such as weak domestic demand, ongoing property sector struggles, and reduced consumer spending. They cautioned that additional government borrowing might not sufficiently counteract deleveraging among local governments and developers. Consumer confidence remains low, particularly in discretionary spending on luxury items like jewelry and cars.

Despite these challenges, some experts believe China can still achieve its 5 percent full-year growth target with appropriate monetary measures, such as short-term rate cuts. Positive aspects include growth in exports driven by electronics and increased overseas investments by Chinese firms. June also saw industrial output exceed expectations, and there were signs of stabilization in property prices in major tier one and tier two cities.

Overall, although achieving the growth target presents challenges, targeted policy interventions could strengthen areas of economic resilience. The outcomes of the ongoing Third Plenum and specific reforms aligned with the country’s current development trajectory are expected to be announced, particularly focusing on pivotal sectors like the private sector, technology, and property.

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