A Review of China's Economy in 2014

Economic Growth Continued to Fall, but the Proportion of the Tertiary Industry Continued to Improve

In 2014, China's real GDP grew by 7.4 %, a decrease of 0.3 percentage points from the previous year and the lowest since 2000 (Fig. 2.1). The main reason for this economic slowdown was the continued deceleration of the secondary industry. The industrial growth rate was 8.3 %, a decrease of 1.4 percentage points from the previous year. The main factors behind the continued slowdown of the secondary industry were excess production capacity and excessive investment in the real estate industry. Because of the long-term accumulation of excess capacity, adjusting the industrial structure and de-stocking the real estate industry took some time, and in 2015, these two industries are still expected to exert a downward pressure on economic growth.

In 2014, the nominal investment in fixed assets (excluding farmers' investment) grew by 15.7 %, a decrease of 3.9 percentage points from the previous year. The contribution of annual capital formation to GDP growth reduced to 38.3 %, a decrease of 16.1 percentage points from the previous year (Fig. 2.2).[1] The continued economic slowdown is bound to hinder urban and rural residents' income growth. In 2014, the per capita disposable income of urban residents grew by 6.8 %, a decrease of 0.2 percentage points from the previous year; the per capita net income of rural residents grew by 9.2 %, a decrease of 0.1 percentage points from the previous year. The residents' consumption structure gradually changed with their increasing income level, showing a fall in material consumption growth but a rise in

Fig. 2.1 Growth rate changes in China's GDP and industrial added value (Data source: CEIC)

Fig. 2.2 Changes in contribution rate of GDP growth based on the expenditure accounting approach (Data source: CEIC)

proportion of service consumption. Following the government's anti-corruption move and restrictions on the “three public expenditures,” the growth rate of the government's public service spending in general apparently slowed down. The total retail sales of consumption goods grew nominally, by 12.0 %, a decrease of 1.1 percentage points from the previous year.[2] The contribution of final consumption to

Fig. 2.3 Changes in proportion of added value of three industries in GDP (Data source: CEIC)

economic growth was 51.2 %, a slight increase of 1.2 percentage points from the previous year. Slow recovery of the external market continues to inhibit China's export growth: the total exports in USD grew by 6.1 %, a decrease of 1.7 percentage points from the previous year. Influenced by the decline in staple commodity prices and the slowing down of domestic demand, China's imports grew by only 0.4 %, a sharp decrease of 6.9 percentage points from the previous year. The contribution rate of net goods and services exports to economic growth sharply increased from

−4.4 to 10.5 %.

From the point of industrial structure, the tertiary industry's share in GDP increased by 2.1 percentage points in 2014, reaching 48.2 %, 5.6 percentage points higher than the share of the secondary industry (Fig. 2.3). The tertiary industry's share continued to rise, ensuring stability of the employment situation for the whole year to a certain extent. Although the economic growth of China continued to decline, 13.22 million new jobs were generated for urban residents, exceeding the target of 10 million new jobs set in early 2014. [3]

  • [1] The statistical bureau has not yet announced this data. However, based on a routine conference of the Commerce Department on January 21, 2015, Shen Danyang, the press spokesperson, said that in 2014, the contribution of foreign trade to economic growth was about 10.5 %. On this basis, we estimated that the rate of contribution of gross capital formation on economic growth sharply declined to 38.3 %, the lowest recorded since 2000. See finance.ifeng.com/ a/20150122/13449424_0.shtml
  • [2] The present total volume of retail sales contains only the domestic “material consumption amount” and “food and beverage service income” and does not include the overall residents' consumption project, especially service consumption, which grew rapidly in recent years. In tourism, for example, since 2008, the number of domestic tourists grew by 13.8 % on average per year, reaching 3.26 billion persons in 2013. The number of outbound tourists grew by 16.5 % on average per year, reaching 98.19 million people in 2013. Tourism revenue reached around 3.25 trillion USD in 2014, an increase of 11 % over the previous year. The number of domestic tourists was 3.6 billion persons, an increase by 10 % over the previous year. The number of outbound tourists hit the 100-million-person mark for the first time, reaching 109 million persons. The number of inbound tourists was 128 million persons, a decrease of 1 % from the previous year
  • [3] The change in China's population age structure eased the pressure on employment to a certain extent. By the end of 2012, persons aged 15–59 years (including those below 60 years), the working-age population, totaled 937 million people; this was 3.45 million persons less than the previous year. By the end of 2013, the working-age population further reduced to 920 million persons; this again dropped to 916 million people by the end of 2014, a decrease of 3.71 million persons from the end of the previous year
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