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Insights into the Chinese Economy
In the first quarter of 2024, China’s Gross Domestic Product (GDP) grew by 4.8% year-on-year, up from 4.5% the previous year. This growth is mainly due to the dual drivers of domestic and foreign demand, with the total retail sales of consumer goods reaching 12.5 trillion yuan, an increase of 9.2%. In the first half of the year, national tax cuts and fee reductions exceeded 1.2 trillion yuan, with small and micro enterprises benefiting from tax reductions totaling 600 billion yuan. E-commerce giant Alibaba announced that due to the government’s tax reduction policy, its operating costs in the second quarter of 2024 decreased by 12%, and its profit margin increased by 6 percentage points.
Annual infrastructure investment grew by 8% year-on-year, reaching 3.5 trillion yuan. The expansion of China’s high-speed rail network resulted in an additional 2,200 kilometers of new lines in 2024, further enhancing domestic logistics and transportation efficiency. Export totals reached $1.55 trillion, a year-on-year increase of 14.5%. Exports to the United States increased by 10.2%, and exports to ASEAN countries increased by 17%. In the second quarter, the People’s Bank of China lowered the benchmark interest rate by 0.3 percentage points, reducing the loan interest rates of commercial banks and consequently lowering the financing costs for enterprises and individuals. Real estate developer Vanke saw its new project financing costs decrease by 9% due to this policy.
Fiscal Strategy Outlook
China’s government fiscal revenue reached 22.8 trillion yuan, an increase of 4.5% year-on-year. In the first half of 2024, national tax cuts and fee reductions exceeded 1.6 trillion yuan, with small and micro enterprises benefiting the most, accounting for 62% of the reductions. A high-tech start-up in Shenzhen saved nearly 2.2 million yuan in taxes by benefiting from the R&D expense deduction policy. The government actively promoted the development of the green economy, increasing fiscal expenditure on green projects by 22%, totaling 310 billion yuan. A wind power company in Hebei reported that due to government subsidies, its annual revenue increased by 18%.
In terms of social security and livelihood, central government expenditure on social security and employment reached 7.2 trillion yuan, an increase of 9% year-on-year. A retiree in Beijing now receives a pension that is 6% higher per month than last year. The central government allocated more than 550 billion yuan to the western and northeastern regions for infrastructure construction and industrial upgrades. In Sichuan Province, a new high-speed rail project supported by government funds is expected to boost the regional economic growth rate by 2.5 percentage points. Fiscal expenditure in education and healthcare increased by 12% and 14%, respectively, reaching 2 trillion yuan and 1.7 trillion yuan. Guangdong Province built 60 new primary and secondary schools, adding more than 60,000 new seats.
Understanding Market Dynamics
In the first quarter, China’s total retail sales of consumer goods reached 12.5 trillion yuan, an increase of 9.2% year-on-year. In the real estate market, in the first half of the year, the national commercial housing sales area reached 900 million square meters, an increase of 8% year-on-year. House prices in first-tier cities rose by 6% year-on-year, while those in second-tier cities increased by 4%. This growth is mainly due to policy support and increased demand for home purchases. China’s automobile sales reached 13 million units, an increase of 10.5% year-on-year. Sales of new energy vehicles reached 3.5 million units, accounting for 26.9% of total sales, an increase of 125% year-on-year. In the stock market, the Shanghai Composite Index rose by 7%, and the Shenzhen Component Index rose by 8.2%. Market gains were mainly driven by technology and consumer stocks. The stock prices of tech giants Alibaba and Tencent rose by 12% and 14%, respectively, in the quarter.
China’s total exports reached $1.55 trillion, a year-on-year increase of 14.5%. Exports to the United States increased by 10.2%, and exports to ASEAN countries increased by 17%. This growth reflects the recovery of global demand and China’s important position in the global supply chain. The national service industry production index increased by 8% year-on-year. Information transmission, software, and information technology services grew by 16%, and the financial industry grew by 9.5%. A fintech company in Shanghai gained significant market share during this period, with business volume growing by 22%. The People’s Bank of China lowered the reserve requirement ratio by 0.6 percentage points to increase market liquidity and support the development of the real economy. This move resulted in an increase of 2.7 trillion yuan in new loans by the banking system, an increase of 12% year-on-year.
Economic Adjustment Forecast
The total retail sales of consumer goods reached 6.5 trillion yuan, an increase of 10% year-on-year. This growth is mainly driven by online consumption and the demand for high-end consumer goods. The sales of high-end products by a high-end appliance retailer in Beijing increased by 17% year-on-year. National real estate development investment increased by 6% year-on-year, reaching 6.5 trillion yuan. Reuters reported that the International Monetary Fund (IMF) expects global economic growth to slow to 3.5% in 2024. National infrastructure investment increased by 8% year-on-year, reaching 3.5 trillion yuan. The government plans to further increase investment in transportation, energy, and information technology in the coming years to promote long-term economic growth. According to Economic Observer, a new high-speed rail project is expected to add 2,200 kilometers of operational mileage in the next two years. The People’s Bank of China lowered the benchmark interest rate by 0.3 percentage points to increase market liquidity and support the development of the real economy. Caijing magazine reported that due to this policy, the financing costs of manufacturing enterprises have been reduced by approximately 12%.
Comprehensive Economic Outlook
In 2024, China’s Gross Domestic Product (GDP) grew by 4.8% year-on-year. The total retail sales of consumer goods reached 21.8 trillion yuan, an increase of 9.2% year-on-year. Online retail sales increased by 16%, accounting for more than 27% of the total retail sales of consumer goods. Alibaba’s annual sales increased by 22% year-on-year, with fresh food and household appliances performing particularly well. National real estate development investment reached 6.5 trillion yuan, an increase of 6% year-on-year. The real estate markets in first-tier cities remained hot, with house prices in Beijing, Shanghai, and Shenzhen rising by 6%-9% year-on-year.
Economic Daily reported that the Shanghai municipal government recently introduced a new home purchase subsidy policy, further stimulating home purchase demand. National infrastructure investment increased by 8% year-on-year, reaching 3.5 trillion yuan. The government is continuously increasing investment in transportation, energy, and information technology. China is accelerating the advancement of “new infrastructure” projects, including 5G networks and data centers. These projects are expected to attract more than 1.2 trillion yuan in investment over the next three years. The People’s Bank of China lowered the benchmark interest rate by 0.3 percentage points to increase market liquidity and support the development of the real economy. This move resulted in an increase of 2.7 trillion yuan in new loans by the banking system, an increase of 12% year-on-year. Agricultural Bank’s loans to small and medium-sized enterprises increased by 17%, effectively supporting the development of the real economy.
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