China’s Economy Shows Signs of Recovery, But Effective Demand Remains a Key Challenge
Beijing, September 16, 2024 – China’s economyis showing signs of recovery, with the consumer price index (CPI) rising for the second consecutive month in August, indicating a gradual improvement in consumer demand. However,the producer price index (PPI) continued to decline, highlighting the ongoing challenges faced by industrial enterprises and the need to further stimulate effective demand.
According to datareleased by the National Bureau of Statistics, the CPI rose by 0.6% year-on-year in August, while the PPI declined by 1.8%. This widening scissors gap between the two indices, reaching 2.4 percentage points, reflects the persistent pressure on industrial enterprises, with their profitability recovery remaining fragile.
The low inflation environment, with the CPI remaining at a low level, suggests that domestic effective demand remains insufficient. This underscores the need for continuedefforts from policymakers to stimulate economic activity and ensure sustainable growth.
The macro policies need to continue to exert efforts, stated Jin Guanping, a prominent commentator on economic issues, in an article published by the Economic Daily. Expanding effective demand requires both stimulating potential consumption and promoting profitable investment.
To boost consumer spending,Jin emphasizes the importance of prioritizing employment and increasing incomes for both urban and rural residents. He also calls for accelerating the expansion and upgrading of service consumption, particularly in areas with high growth potential, to effectively promote large-scale consumption.
On the investment front, Jin advocates for leveraging the government’s investment to stimulate further economic activity. He suggests utilizing the long-term special government bonds to accelerate the construction of key infrastructure projects. Furthermore, he emphasizes the need to create a more conducive environment for private capital participation in national projects, ensuring that private investors are confident, willing, and able to invest.
Promoting large-scale equipment upgrades and encouraging thereplacement of old consumer goods with new ones are identified as crucial strategies for expanding effective demand. These initiatives not only stimulate consumption and investment but also contribute to the development of advanced production capacity and improved efficiency.
The Chinese government has been actively implementing these strategies, with the recent allocation of long-term special government bonds to supportinfrastructure projects and the introduction of measures to facilitate private investment. These efforts are expected to further boost demand in the coming months.
Looking ahead, the upcoming Mid-Autumn Festival and National Day holidays are expected to drive up demand for services, particularly travel and tourism. The traditional consumption peak in the fourth quarter could further contribute to abalanced supply and demand environment. As a result, the CPI is likely to continue its moderate upward trend, while the PPI is expected to see a narrowing of its decline.
While China’s economy is showing signs of recovery, the challenge of expanding effective demand remains a key focus for policymakers. Continued efforts to stimulate consumption,attract investment, and create a more conducive environment for economic activity are crucial to achieving sustainable and inclusive growth.
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