China's economic growth in the fourth quarter of 2023 has missed the mark, growing only 5.2% compared to the expected 5.3%, as reported by the National Bureau of Statistics. This underperformance highlights the ongoing challenges faced by the world's second-largest economy, including a protracted property crisis, weak consumer and business confidence, and mounting local government debts.
For the entire year of 2023, China's GDP also grew at a rate of 5.2%, partly aided by the low-base effect from the previous year's COVID-19 lockdowns. Analysts had anticipated this level of growth, but the economy's struggle to sustain a robust post-pandemic recovery has become increasingly evident. The data also showed that on a quarter-by-quarter basis, GDP grew by 1.0% in the October-December period, in line with forecasts but slower than the revised 1.5% gain in the previous quarter.
The property sector, traditionally a key driver of China's economy, continued to weigh down the broader economic recovery. December saw new home prices fall at the fastest pace since February 2015, marking the sixth consecutive month of decline. Property sales by floor area fell by 8.5% for the year, while new construction starts plunged by 20.4%.
Retail sales growth in December also fell short of expectations, growing only by 7.4% against the predicted 8%. Meanwhile, industrial production rose by 6.8% in December from a year earlier, slightly above the forecasted 6.6%. Fixed asset investment for the entire year rose by 3%, marginally above the predicted 2.9% increase. Notably, investment in real estate dropped by 9.6% in 2023, while investment in infrastructure and manufacturing rose by 5.9% and 6.5%, respectively.
Online retail sales of physical goods rose by 8.4%, accounting for nearly 28% of overall retail sales. However, sales of daily necessities, medicine, cultural and office products, as well as construction-related materials, fell in December. This decline is noteworthy, considering the abrupt end to China's Covid-19 controls in December 2022 and the subsequent rush to buy medicine amid widespread illness.
Furthermore, China's population shrunk by more than 2 million people to 1.41 billion in 2023 from the prior year, following a decline of 850,000 people in 2022 from 2021. This demographic shift poses additional long-term challenges for economic growth.
The National Bureau of Statistics emphasized the need to enhance economic vitality and mitigate risks, stating, "We must effectively enhance economic vitality, prevent and mitigate risks, improve social expectations, consolidate and boost the sound momentum of economic recovery and growth, in a bid to effectively upgrade the quality and appropriately expand the quantity of the national economy."
China's patchy economic recovery, with many challenges ahead, will require active government policy and global economic cooperation to foster sustained growth. The nation's ability to navigate these economic headwinds will be crucial in shaping its economic trajectory in the coming years.
