Key takeaways
Major economic provinces (according to the regional economic volume in 2023, the six provinces of Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan, and Henan are selected for analysis) account for half of the mainland's total economic output, and are an important engine, source of innovation, and experimental field for institutional reform for the high-quality development of the mainland's economy. In 2023, major economic provinces will go all out to fight for the economy, providing strong support for the country to achieve its economic growth target as scheduled. At the same time, the realization of the economic target in 2024 is also facing challenges such as the increasing complexity, severity and uncertainty of the external environment, as well as the deepening of the aging of the population, the diminishing marginal return on investment, the contraction of consumption, and the bottleneck of cutting-edge technological innovation and development.
■Quartz Hua Liu Shuai
01
Large economic provinces are an important support for the mainland's economic growth
The mainland's economy is showing a wave and tortuous recovery trend. In 2023, the GDP will exceed 126 trillion yuan, an increase of 5.2% over the previous year, and the gap between the GDP and the US economic growth rate will be narrowed to 1.1 percentage points (denominated in US dollars), and the economic recovery momentum will be further consolidated. In terms of its share of the global economy, in 2022, China's GDP accounted for 17.81% of the global economy, and the difference between the GDP of China and the United States in the global economy decreased from 10.22 percentage points in 2012 to 7.41 percentage points. After the epidemic, the mainland's economic recovery process has shown remarkable characteristics of strong resilience and sufficient stamina. The mainland is still an important engine of world economic growth, and its contribution to world economic growth is expected to further increase.
Judging from the data for 2023, the recovery of the mainland's economic resilience is largely due to the pull effect of large economic provinces. In 2023, there will be 4 provinces with a GDP of more than 8 trillion yuan, namely Guangdong, Jiangsu, Shandong, and Zhejiang, accounting for 34.787% of the country's total economic output; There are 9 provinces with a GDP of more than 5 trillion yuan, including Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan, Henan, Fujian, Hunan and Hubei, accounting for 56.95% of the country's total economic output. Among them, Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan and Henan accounted for 44.25% of the country's GDP.
The six provinces of Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan, and Henan are important supports for the mainland's fiscal revenue and manufacturing investment. Since 2008, the general public budget revenue of the above six provinces has accounted for more than 20% of the country's total. From 2021 to 2023, the general public budget revenue of the above six provinces accounted for an average of about 23% of the country. In 2023, the year-on-year growth rates of general public budget revenue in Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan, and Henan provinces will be 4.45%, 7.25%, 5.08%, 6.97%, 13.29%, and 11.46%, respectively, all higher than the national average (3.41%). In 2023, the cumulative manufacturing investment in Zhejiang, Shandong, and Jiangsu will increase by 14.1%, 11.5%, and 9.1% respectively, all of which are higher than the national average, driving the growth rate of national manufacturing investment to rise. In December 2023, the cumulative year-on-year growth rate of industrial added value above designated size in Jiangsu, Shandong, Sichuan and Zhejiang was 7.6%, 7.1%, 6.1% and 6% respectively, exceeding the national average (4.6%) in the same period. In 2022, the number of patent applications granted in the six provinces accounted for 56.79% of the national total.
At present, the mainland's economic growth depends to a certain extent on the support of the major economic provinces, and this unbalanced development puts forward higher requirements for the future development of the major economic provinces. The global political and economic situation affects the major economic provinces of the mainland, and the economic fluctuations and uncertainties of the major economic provinces will also affect the improvement of the national economic aggregate, growth rate and development quality. In provinces with higher economic development level and quality, the process of transformation from quantity to quality needs to be driven by stable innovation, and there is great uncertainty in innovation, which affects the deviation between the actual growth rate and the potential growth rate. The economic growth rate of provinces with low economic development level may be limited by siphon effect and institutional constraints. Under the premise of high-quality development, the mainland economy is still facing considerable pressure to maintain a reasonable growth rate. Among the top six provinces in terms of economic scale, the expected economic growth rate of Sichuan, Zhejiang, and Henan provinces in 2024 is higher than that of the whole country.
02
Challenges that large economic provinces may face in achieving their new growth targets
The economic growth target of the new development stage is the economic growth target under the premise of high-quality development, and the large economic provinces are still an important support for the realization of the new growth target. At present, major economic provinces may face challenges from many aspects, such as international political and economic instability, population aging, diminishing marginal returns on investment, insufficient support for innovation capacity, and shrinking consumption.
(1) The unstable international political and economic situation has adversely affected the trade exchanges of major economic provinces
Since 2015, the mainland's trade dependence has remained stable at more than 30%, and it is still a veritable manufacturing trading power. Since October 2021, geopolitical risks have continued to be at a high level, restricting the healthy development of import and export trade. Regional military conflicts, general elections, and popular demonstrations have exacerbated geopolitical risks and accelerated regional economic fragmentation. According to data disclosed by the China Council for the Promotion of International Trade, the global economic and trade friction index in December 2023 is still in the high range. The amount of global economic and trade friction measures increased by 14% year-on-year and 66.5% month-on-month. In terms of China-related economic and trade frictions, the China-related economic and trade friction index of 19 countries (regions) was at a high level, and the amount of China-related economic and trade friction measures in 19 countries (regions) increased by 15.1% year-on-year and 131.8% month-on-month. The economic and trade friction index of electronics, machinery and equipment, light industry, medicine and transportation equipment industries is at a high level. The increase in instability and uncertainties in the international political and economic sphere has brought severe challenges to the import and export trade of the mainland's major economic provinces, especially the eastern export-oriented economic provinces.
(2) The aging of the population is rising, which exacerbates the pressure on local fiscal expenditure
"Growing old before getting rich" has become a prominent feature of the mainland's current economic development. In 2022, the mainland's per capita GDP will be US$12,720.22, doubling compared with 2012, but compared with developed economies such as the United States (US$76,329.58) and Japan (US$34,017.27), there is still a lot of room for improvement in economic development. The working-age population in mainland China has decreased, with the proportion of people aged 15-64 falling from 74.5% in 2010 to 68.26% in 2023. The number of elderly people continues to increase, and the dependency ratio of the elderly population has increased from 8.45% in 2009 to 13.72% in 2022. In 2022, the proportion of the working-age population with higher education in the United States, South Korea, and the European Union was 71.78%, 72.18%, and 76.98%, respectively, while the gross enrollment rate of higher education in mainland China was 57.8% in 2021, and the proportion of the working population with graduate education (including master's and doctorate) was only 6%.
Image source/Authorized by Photo.com
The aging of the population in major economic provinces has become more prominent, pushing up the scale of medical and health fiscal expenditure. Since 2012, the dependency ratio of the elderly in Guangdong, Zhejiang, Jiangsu and Shandong provinces has increased rapidly. In 2022, Zhejiang, Jiangsu, Shandong, Henan, and Sichuan will all exceed the national average for the dependency ratio of the elderly population. In the past 10 years, the old-age dependency ratio in Zhejiang, Shandong and Jiangsu provinces increased by 9.61%, 11.27% and 11.04% respectively. The proportion of medical and health expenditure in the three provinces increased by 1.94%, 2.81% and 3.12% respectively.
(3) The growth rate of investment has stabilized, and the support for economic growth has weakened
Over the past decade, mainland investment has continued to contract, and its contribution to GDP growth has continued to decline. According to the National Bureau of Statistics, from 2012 to 2022, the mainland's investment rate fell from 46.19% to 43.2%, the year-on-year growth rate of fixed asset investment in the whole society decreased from 18% in 2012 to 2.8% in 2023, and the year-on-year growth rate of manufacturing investment decreased from 22.03% in 2012 to 6.5% in 2023. Focusing on the six major economic provinces of Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan and Henan, the investment indicators are not optimistic, and the marginal return on investment is decreasing, reflecting a situation similar to the overall investment situation of the country.
(4) Consumption growth is sluggish, and its role in driving economic growth still needs to be improved
Compared with import and export trade and investment, consumption has not driven economic growth as expected. In 2023, the contribution rate of final consumption expenditure to GDP growth will increase to more than 82%, but the actual year-on-year total retail sales of consumer goods and the cumulative area of commercial housing sales will decline to varying degrees. From 2008 to 2022, the proportion of total retail sales of consumer goods in Guangdong, Jiangsu, Shandong, and Zhejiang provinces did not show an upward trend, and the cumulative year-on-year growth rate of commercial housing sales in the above four provinces continued to decline until it fell below zero point since the first quarter of 2023. Social consumption such as education, medical care, pension and housing is insufficient, the supply of high-quality basic public services is still insufficient, and the price of services has risen, which has compressed the space for private consumption expenditure and affected the improvement of private consumption. In 2022, the national average of the number of beds in medical institutions in mainland China was 69.16 per 10,000 people, which is half of the national average of 1,262 beds per 100,000 people in Japan. Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan, and Henan provinces, the index values are 48.06, 66.11, 68.25, 58.03, 81.67, and 76.20 per 10,000 people, and only Sichuan and Henan exceed the national average. In 2023, the per capita consumption expenditure of urban residents will be 32,994 yuan, of which the per capita residential consumption expenditure will be 7,822 yuan, accounting for 23.7%. The proportion of new citizens' consumption expenditure on renting is relatively high, which significantly increases their living costs. The household registration system restricts the release of the consumption potential of new citizen groups. In 2021, the data of the seventh national population census showed that there were still 492.76 million people separated from households in the country, while the number of separated households in Guangdong, Zhejiang, and Jiangsu provinces was still 47 million in 2021. It is difficult for people with separated households to fully enjoy high-quality basic public services such as medical and health care, education, employment, social security and pension, which is not conducive to the accumulation of human capital and intergenerational inheritance, weakens their expectations for future development, and reduces the consumption willingness of new citizen groups.
(5) Technological innovation support and innovation late-mover capacity improvement are facing more challenges
As the highland of industrial technology innovation in mainland China, the six major economic provinces of Guangdong, Jiangsu, Shandong, Zhejiang, Sichuan and Henan are major industrial clusters in mainland China, providing rich application scenarios for cutting-edge technological innovation and technological industrialization development. From the perspective of the comparison of the global innovation index, from 2011 to 2023, the continental innovation index increased to 55.31, lower than the United States (63.53) and Germany (58.76). For a long time, the mainland has adopted the innovation model of "introduction-absorption-re-innovation". However, at this stage, the mainland is facing challenges such as the difficulty of making breakthroughs in strategic frontier technologies, the low localization rate of key core components and components, and the lack of solid basic research to support them, which puts forward higher requirements for major economic provinces to take the lead in promoting technological innovation model reform and cutting-edge technology breakthroughs. In addition, there is still a lot of room for improvement in the mainland's talent dividend. In terms of the proportion of people with higher education in the labor force, in 2022, both the United States and the European Union countries reached more than 70%. According to the National Bureau of Statistics, in 2022, 52.8% of the new labor force on the mainland had higher education and 29.5% had secondary education. In 2022, only 7.9% of the country's heads of household have a bachelor's degree or above. In 2021, the average number of students enrolled in higher education per 100,000 population in mainland China was 3,301, while Guangdong, Zhejiang, and Jiangsu showed a downward trend, and the further improvement of human capital accumulation faced constraints.
03
Policy recommendations for giving full play to the role of major economic provinces in promoting growth
The major economic provinces are the highlands where production factors are concentrated, and have become an important support for the high-quality economic growth of the mainland. The challenges faced by the major economic provinces reflect the challenges that the mainland economy must overcome to achieve its new growth target. In the process of accelerating the recovery of the mainland economy, it is necessary to pay attention to the leading role of major economic provinces in various aspects, effectively promote the transformation of potential growth rate into actual growth rate, promote steady economic and social transformation and institutional reform, and promote the steady and far-reaching high-quality development of the mainland economy.
(1) Combine "going out" with "bringing in" to actively maintain the stability of regional industrial and supply chains
The first is to give full play to the active role of the promising government in maintaining the safety and stability of regional industrial and supply chains, build a platform for "going out" and "bringing in", create a market-oriented, law-based and international first-class business environment, and provide public services in a timely, accurate, efficient and convenient manner. The second is to mobilize the enthusiasm of strategic emerging industry enterprises, the main enterprises of the cutting-edge technology industry chain, leading enterprises and specialized and new "little giant" enterprises, ensure the control of key mineral resources and key core components, actively maintain a stable industrial chain and supply chain relationship, cultivate an innovative industrial ecology, improve the upstream and downstream supporting capabilities of the industry, and further enhance the cultivation and incubation capabilities of small and medium-sized scientific and technological innovation enterprises. The third is to combine the promising government with the effective market, make overall layout, regional linkage, organize groups to attract investment, bundle investment, promote the gradient transfer of regional industries, promote the optimization and upgrading of regional industrial structure, and build a global forward-looking technology gathering place and industrial development highland with strong innovation leadership, complete industrial facilities and profound research background on the basis of a large economic province, actively cultivate supporting industries and characteristic industries in relatively backward economic areas, form a polycentric economic growth pole, and alleviate the regional and industrial imbalance of economic growth.
(2) Expand the combination of effective investment and social consumption, and promote the efficient linkage of supply and demand
First, centering on the formation of new quality productive forces, we should speed up the layout of effective investment. Increase support for emerging industries, emerging technologies and their related basic scientific research in major economic provinces, build a talent team for core technologies to overcome difficulties, and guide the structural reform of talent training; The major economic provinces will be used as the experimental site for the reform of the incentive system for innovative talents, break the institutional constraints, and stimulate the innovation vitality of emerging technology talents. The second is to guide the development of new types of consumption, actively cultivate new consumption growth points, drive investment in related industries and consumption scenarios, and form a virtuous circle in which consumption and investment promote each other. The third is to make efforts in the areas of people's livelihood shortcomings, moderately expand the scale of investment in affordable housing, medical and health care, education, employment and social security in major economic provinces, weigh the challenges and opportunities brought about by population aging, moderately liberalize the entry threshold of social capital, assess the dynamic impact of population flow, increase the supply of high-quality basic public services, and deeply tap the potential for consumption expansion such as care and housekeeping brought about by aging.
(3) Accelerate the reform of the household registration system and strengthen the development expectations of new citizen groups
Promote the construction of a new type of urbanization with people at the core, and promote the release of consumption and investment potential through stepped urban population growth. In large economic provinces, megacities and megacities, we will accelerate the reform of the household registration system, so that more new citizen groups can enjoy high-quality basic public services that are cheap, high-quality, and more inclusive, reduce the crowding out effect and unnecessary waste of private consumption, steadily promote the accumulation of human capital, and release the consumption potential of new citizens.
(Author's Affiliation: Chinese Academy of Fiscal Sciences)
Chief Producer丨Wang Hui and Che Haigang
Producer丨Li Piguang, Wang Yu, Liu Weimin
Editor-in-Chief丨Mao Jinghui Editor丨Gu Yun