On February 28, China's National Bureau of Statistics (NBS) has released the Statistical Communiqué of the People's Republic of China on the 2021 National Economic and Social Development. The report affirms some data indicators including GDP that have been disclosed before. The Statistical Communiqué also reveals a series of major national economic data, which depicts the overview of China's economic development last year. According to ANBOUND, the report also shows some of the macroeconomic development and trends in China.
The GDP figures, both total volume and per capita data, reveal that the Chinese economy maintains a significant growth rate. Last year, China's GDP was recorded at RMB 114.367 trillion, an increase of 8.1% over the previous year, with a 5.1% growth rate over the last two years. The annual per capita GDP was RMB 80,976, a rise of 8.0% over the previous year, or equivalent to USD 12,551. Sheng Laiyun, the deputy head of the NBS, pointed out the per capita GDP in China is greater than that of the worlds. Converted with the average annual exchange rate, the total economic volume of China was USD 17.7 trillion, which is estimated to account for more than 18% of the world economy and contributes about 25% to world economic growth.
The Chinese economy's high-quality development is exemplified by the continuous improvement of overall labor productivity. Data shows that the overall labor productivity was RMB 146,380 per person in 2021, an increase of 8.7% over the previous year, which is higher than the growth rate of per capita GDP. This increase in production efficiency means that it is making a greater contribution to economic growth. Meanwhile, the per capita disposable income nationwide was RMB 35,128 in 2021, an increase of 9.1% over the previous year, or 8.1% real growth after deducting price factors. The median per capita disposable income nationwide was RMB 29,975, an increment of 8.8%. This data implies that China has, in essence, accomplished the national goal to bound the growth of household income with economic development. These have alluded to the achievements of continuing to promote economic structural reform and common prosperity.
The Statistical Communiqué, however, also exposes some challenges China's economy currently faces. First, the driving factors of investment look insufficient. The contribution to economic growth has been increasingly dependent on domestic consumption. It presents that the contribution of the final consumption expenditure to the GDP growth rate in 2021 increased by 5.3 percentage points, with a share of 65.4%. The contribution of the gross capital formation to the GDP growth rate rose by 1.1 percentage points, with a share of 13.6%. The contribution of the net exports of goods and services to the GDP growth grew by 1.7 percentage points, with a share of 21.0%. In contrast, in 2020, the contribution of the final consumption expenditure to the GDP growth rate declined by 0.5 percentage points, that of the gross capital formation to the GDP growth rate expanded by 2.2 percentage points, and the net exports of goods and services to the GDP growth rate gained by 0.7 percentage points. Visibly, domestic consumption and net exports are the main drivers that support China's economic growth for the year 2021.
Despite the exhilarating restoration in domestic consumption and the rising net exports, unfavorably, in 2021, the contribution of capital formation was declining, which marks the dwindling investment in the real estate industry last year. From the investment data, the investment in fixed assets (excluding rural households) was RMB 54.4547 trillion, an increase of 4.9%. Of the fixed assets investment (excluding rural households), the private investment in fixed assets rose by 7.0%, and the investment in infrastructure increased by 0.4%. The weak growth in the government-based infrastructure investment indeed literally explains the slump in total investment last year.
Correspondingly, the pattern of financial revenue and expenditure last year reveals that the fiscal policy is not verily loosening. Last year, the national public budget revenue was RMB 20.2539 trillion, an increase of 10.7% over the previous year. Of it, taxation revenue was RMB 17.2731 trillion, a rise of 11.9%. The national public budget expenditure was RMB 24.6322 trillion, an increment of 0.3% over the previous year. The newly added tax and fee cuts in 2021 were about 1.1 trillion yuan. In other words, even with tax and fee cuts, the fiscal revenue maintained a relatively high growth rate, while the fiscal expenditure grew rather slowly. These policy issues not only stifle economic growth, but also influence current fiscal policy with a proactive mood.
In relative, regional differentiation deserves more attention from China's government. In 2021, the investment in the Eastern region rose by 6.4%, the Central region by 10.2%, the Western region by 3.9%, and the Northeast region by 5.7%. In regions with greater economic difficulties and heavier debt burdens, such as the Western and the Northeastern region, a lacking investment, in addition to the Covid-19 pandemic, have further widened the regional development gap. According to the Statistical Communiqué, the annual GDP of the Eastern region was RMB 59.2202 trillion, an increase of 8.1% over the previous year. The annual GDP of the Central region was RMB 25.0132 trillion, a rise of 8.7%. The annual GDP of the Western region was RMB 23.971 trillion, an increment of 7.4%. The annual GDP of the Northeast region was RMB 5.569.9 trillion, a rise of 6.1%. Remarkably, the economic growth rate of the Western and the Northeastern regions is far behind the national average. In terms of regional coordinated development, the annual GDP of the Beijing-Tianjin-Hebei region was RMB 9.6356 trillion, an increase of 7.3% over the previous year. The annual GDP of the Yangtze River Economic Belt was RMB 53.0228 trillion, an increment of 8.7%. The annual GDP of the Yangtze River Delta was RMB 27.6054 trillion, a rise of 8.4%. These figures indicate that the economic gaps between the East-West and the North-South are widening.
In terms of population growth and urbanization process, the total national population at the end of 2021 was 1.4126 billion, an increase of 480,000 over the previous year, while the natural growth rate was only 0.34‰. The number of the population who live in places other than their household registration area was 504 million, of which 385 million were migrants. At the end of 2021, the urbanization rate of permanent residents was 64.72%, an increment of 0.83 percentage points from the previous year. The data exhibits a concern over a long-term slowdown in labor force growth, which could affect economic growth sequentially. As the urbanization process is driven through the development of the real estate market, the hundreds of millions of migrants reveal a substantial demand for thorough urbanization. This infers a great potential for future development in the real estate market.
From the development trend and policy orientation, economists at ANBOUND have two points of view. On the one hand, in the face of diminishing population numbers, boosting high-quality development and enhancing production efficiency is unavoidable.
On the other hand, expanding household income through common prosperity unleashes further potential domestic consumption, the key to the economic stability and keeping a growth. Promoting investment growth could be one huge challenge in China might have to delve further into in this new year.
A phase of advanced urbanization frequently results in regional coordinated growth and the closing of the gaps in regional disparities. The recent meeting held by the Political Bureau of the CCP Central Committee once again emphasizes intensifying the implementation of macro policies for economic stability, reform deepening, and energizing market players. The Chinese government will concentrate on further implement on innovation-driven development strategy, domestic demand expansion, coordinated regional development, and new patterns of urbanization. In view of the comprehensive yet detailed look at the 2021 economy, the corresponding policy directions for this new year can be clearly figured out.
Final analysis conclusion:
China's economic activities in 2021 reflected the features of high-quality development and common prosperity. The year also presents weakening growth in population and capital, as well as the risk of widening regional gaps under the COVID-19 pandemic. As a result of the economic problems and difficulties last year, some wiggle room in the current macro policies is required.
