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China’s Economy Grows by 5.3%, Driven by High-Tech Manufacturing Surge As US Innovation Race Intensifies

Published April 18, 2024 4:57 PM
Shraddha Sharma
Published April 18, 2024 4:57 PM

Key Takeaways

  • China’s economy expanded by 5.3% in the first quarter of 2024.
  • The growth rate surpassed analysts’ highest projections of 4.6%.
  • Advancements in high-tech and equipment manufacturing sectors are the main drivers of  GDP growth.

China’s economy has shown a notable expansion in the first quarter of 2024, beating analyst estimates. The country reportedly grew at 5.3%, which exceeds the government’s target of 5% growth.

While improved demand played a role in Chinese growth, tech manufacturing is now in focus.

Chinese Industrial Output Surged

Q1 2024 was a star performer in terms of China’s quarterly industrial growth amid its economic troubles. As per  the official press release by the National Bureau of Statistics (NBS), China not only saw a 5.3% growth in GDP, it added 6.1% in value-added industrial output.

Industries contributed 37.3% to the total GDP growth, indicating a strong rebound and improvement from previous quarters.

Sheng Laiyun, deputy director of the NBS, emphasized the recovery trend. Laiyun pointed out that the figures are up 3.1% against 2023 and 0.8% from Q4.

NBS pins the growth to surging industrial output, particularly within the high-tech manufacturing sub-sector. The growth in the industrial sector was also reportedly backed by improved market demand, supportive macroeconomic policies, and improved inventory and operational conditions within industrial firms.

Exceeding Growth Expectations

The first quarter growth came as a surprise to many as it outpaced China’s own annual growth target of 5%. Factors contributing to this performance also include increased production capacities and higher operating rates among industrial firms, particularly in high-tech and equipment manufacturing sectors, as per Zhou Maohua, a macroeconomist at China Everbright Bank.

However, a recent Bloomberg report sheds light on some of the underlying challenges  of China’s economic data. Despite the impressive headline GDP growth figures, the economy is experiencing its longest deflationary period since 1999. The stagnation in income growth for workers and corporations has been another red flag. In nominal terms, GDP grew by only 4.2%, and household disposable income rose by 6.2%, still below pre-pandemic levels.

The report also finds that the manufacturing sector growth was buoyed by strong exports and investments in new energy. This comes as the reliability of Chinese data has been a matter of contention.

Technological Competition with the US

On the back of China’s industrial growth, its influence in the global technology race is becoming increasingly pronounced, especially as it competes with the US.

China is maintaining its lead in innovation, demonstrated by a UN report  that states Chinese inventors topped international patent applications for the second year in a row, surpassing the US. This leadership in innovation is set to have effects on global technology dynamics.

Data: NCSES, special tabulations (2023) by 1790 Analytics of European Patent Bibliographic Data (EBD), Chart: CCN

The rivalry between China and the US is particularly fierce in areas like chip manufacturing and other emerging technologies. An example of this technological tug-of-war is Microsoft’s recent investment in G42, a leading AI company based in the United Arab Emirates. The partnership is noteworthy as Microsoft moved away from Chinese technological partnerships to align more closely with a UAE company. And it is possible that this realignment have broader implications in the global tech race as AI is currently leading in the sector.

Where is China headed?

China’s first-quarter economic growth has not only surpassed expectations but also highlighted the country’s industrial and technological advancements. This intensifies competition with the US in emerging tech and innovation. The sector is also making a major impact globally, resetting geopolitical powerplay.

Contributions from high-tech manufacturing sectors could continue to grow China’s GDP, remove its economic woes, and put the country at the forefront of the global innovation race. That is also considering its growth data can be trusted.

Meanwhile, China continues to navigate through its deflationary pressures and economic restructuring. And 5% growth target would be crucial for China in 2024.

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