In the second half of 2024, China's economy will have five amazing trends, and the fourth trend is unexpected!

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Five major trends in China's social economy in the second half of 2024: opportunities and challenges coexist

With the continuous changes in the global economic landscape, China's economic and social development is also facing new opportunities and challenges. Based on the latest economic data and social trends, we forecast the following five trends that China is likely to exhibit in the second half of 2024. These trends cover many fields such as economy, society, science and technology, and they influence each other and jointly shape China's future development picture.

Regional economic development presents a new pattern

In recent years, China's regional economic development strategy has been continuously adjusted and optimized, and the regional coordinated development strategy proposed in the 14th Five-Year Plan is being implemented in depth. In the second half of 2024, we may see this trend come to the fore further.

According to the latest data from the National Bureau of Statistics, in the first half of 2024, the GDP growth rate in the western region will reach 6.8%, 1.5 percentage points higher than the national average. This data reflects the gradual improvement of the imbalance in regional economic development. This trend is expected to continue in the second half of the year, and the central and western regions are expected to become new engines of economic growth.

Specifically, the western region, represented by the Chengdu-Chongqing Economic Circle, is accelerating the development of modern service industries and high-tech industries. For example, in the first half of 2024, the added value of Chengdu's digital economy increased by 15% year-on-year, accounting for more than 40% of GDP. Chongqing's investment in intelligent manufacturing, integrated circuits and other fields has grown by more than 20%.

At the same time, the eastern coastal areas are accelerating industrial upgrading and climbing to the high end of the global value chain. Taking the Yangtze River Delta region as an example, the added value of high-tech manufacturing in the first half of 2024 increased by 12% year-on-year, accounting for 18% of the added value of industries above designated size.

However, the formation of a new pattern of regional economic development also faces many challenges. First of all, there is still a phenomenon of "peacocks flying southeast" in the flow of talent, and the central and western regions are facing the pressure of brain drain. Secondly, environmental pollution may be transferred in the process of industrial transfer, and it is necessary to be vigilant against the "pollution paradise" effect. Finally, the degree of inter-regional infrastructure interconnection still needs to be improved, which affects the efficiency of coordinated development.

From the perspective of international comparison, China's regional economic development strategy has certain similarities with the EU's regional policy, both emphasizing narrowing regional disparities and promoting coordinated development. But the challenges facing China are more complex and require coordinated development on a larger geographical scale.

The upgrading of consumption structure is accelerating

With the continuous expansion of China's middle-income group, the upgrading of consumption structure is accelerating. This trend is likely to be even more pronounced in the second half of 2024.

According to the latest data, in the first half of 2024, China's total retail sales of consumer goods increased by 8.5% year-on-year, of which online retail sales increased by 15%, accounting for 30% of the total retail sales of consumer goods. This indicates that the consumer market is recovering rapidly and taking on new characteristics.

Specifically, the following aspects are worth paying attention to:

1. Health consumption continues to grow: In the first half of 2024, healthcare spending increased by 12% year-on-year, much higher than the average growth rate of consumption. This trend is expected to continue in the second half of the year as the aging population accelerates and health awareness increases.
2. Recovery of cultural tourism consumption: As the impact of the epidemic gradually subsides, the demand for inter-provincial and outbound travel has been rapidly released. In the first half of 2024, the number of domestic tourists increased by 25% year-on-year, and the number of outbound tourists increased by 80%.
3. Rapid growth in the smart home market: In the first half of 2024, the sales of smart home appliances increased by 30% year-on-year, and the penetration rate of smart speakers, sweeping robots and other products increased significantly.
4. Popularization of the concept of green consumption: The sales of new energy vehicles continue to grow, with a market share of 35% in the first half of 2024. At the same time, there is a strong demand for green products such as energy-saving household appliances and organic food.

However, the upgrading of consumption structure also faces some challenges. First of all, the slowdown in the growth rate of household income may restrict the release of consumption potential. Second, the rapid growth of consumer credit brings potential financial risks. Finally, the tendency of "conspicuous consumption" in the process of consumption upgrading needs to be guided.

From the perspective of international comparison, China's consumption structure is upgrading faster than most developing countries, but it still lags behind developed countries in terms of the proportion of service consumption. For example, in 2023, China's service consumption will account for 45% of total consumption, while in United States, the proportion has exceeded 70%.

Scientific and technological innovation drives industrial transformation

In the context of a new round of global scientific and technological revolution and industrial transformation, China is accelerating its innovation-driven development strategy. In the second half of 2024, the role of scientific and technological innovation in promoting industrial transformation may be further strengthened.

According to the Ministry of Science and Technology, in the first half of 2024, China's R&D spending intensity (the ratio of R&D spending to GDP) will reach 2.8%, close to the level of innovative countries. Against this backdrop, breakthroughs have been made in a number of priority areas:

1. Artificial intelligence: China leads the world in the number of citations in areas such as machine learning and computer vision. The establishment of AI industrial clusters in Beijing, Shanghai and other places is promoting the application of AI technology in healthcare, finance, manufacturing and other fields.
2. Quantum technology: Chinese scientists have made important breakthroughs in quantum communication and quantum computing. In June 2024, China announced the successful development of a 76-qubit programmable superconducting quantum computing prototype.
3. Biomedicine: Breakthroughs have been made in cutting-edge technologies such as mRNA vaccines and CAR-T cell therapy. Taking Shanghai Zhangjiang Pharmaceutical Park as an example, 200 new biopharmaceutical enterprises will be added in the first half of 2024, bringing the total number to more than 1,000.
4. New energy technology: The cost of photovoltaic power generation continues to decline, and has dropped to below 0.2 yuan/kWh in the first half of 2024. The hydrogen energy industry chain has been continuously improved, and the scale of fuel cell vehicle demonstration operation is leading in the world.

However, technological innovation drives industrial transformation and faces many challenges. First of all, the problem of "stuck neck" in core technologies still exists, such as high-end chips, industrial software and other fields are still relatively dependent on imports. Secondly, the efficiency of the transformation of scientific and technological achievements needs to be improved, and the collaborative innovation mechanism of industry, university and research needs to be further improved. Finally, the cultivation and introduction of innovative talents are facing the pressure of international competition.

From the perspective of international comparison, China is already in the leading position in the world in the fields of 5G, artificial intelligence, quantum technology and other fields, but there is still a gap with United States and other scientific and technological powers in terms of basic research and original innovation capabilities. For example, in the 2023 Nature Index rankings, Chinese institutions accounted for 21%, compared to 24% in the United States.

Demographic changes are accelerating social transformation

China is facing profound demographic changes that will have a profound impact on economic and social development. This trend is likely to be even more pronounced in the second half of 2024.

According to the National Bureau of Statistics, in the first half of 2024, China's population aged 60 and above accounted for 20.5% of the total population, marking China's entry into a moderately aging society. At the same time, the natural growth rate of the national population fell to 0.5 per thousand, close to zero growth.

These demographic changes are accelerating the transformation of all sectors of society:

1. Rapid development of the pension industry: In the first half of 2024, the market size of China's pension service industry will reach 8 trillion yuan, a year-on-year increase of 15%. New models such as smart elderly care and the combination of medical care and elderly care are constantly emerging.
2. Reallocation of educational resources: The demand for pre-primary and tertiary education has increased, while the number of students in compulsory education has decreased. In the first half of 2024, 5,000 new kindergartens will be added across the country, and 1 million new students will be enrolled in higher education.
3. Structural changes in the labor market: The decline in the proportion of the working-age population has prompted enterprises to accelerate automation and intelligent transformation. In the first half of 2024, the density of industrial robots (the number of industrial robots per 10,000 employees) will reach 300, an increase of 20% over the same period of the previous year.
4. Adjustment of the age structure of the consumer market: The rapid rise of the silver economy has led to a strong demand for age-appropriate products and services. In the first half of 2024, the market size of elderly products will increase by 25% year-on-year.

However, demographic change also brings with it its own set of challenges. First of all, the pension system is under great pressure and needs to be reformed quickly. Second, the weakening of the demographic dividend may affect the economic growth potential. Finally, intergenerational tensions are likely to intensify, and a more inclusive social environment needs to be built.

From the perspective of international comparison, the aging rate of Chinese population is faster than that of most countries. As the country with the world's most aging population, Japan's experience in dealing with it is worth learning from. For example, Japan is responding to labor shortages by developing the robotics industry and promoting lifelong learning.

The pace of green and low-carbon transformation is accelerating

Against the backdrop of global climate change, China is accelerating its green and low-carbon transition. This trend is likely to deepen further in the second half of 2024.

According to the Ministry of Ecology and Environment, in the first half of 2024, China's energy consumption per unit of GDP fell by 3% year-on-year, and the share of renewable energy generation in total electricity generation reached 35%. This shows that positive progress is being made in the green and low-carbon transition.

Specifically, the following aspects are worth paying attention to:

1. Accelerating energy structure adjustment: In the first half of 2024, China added 60 GW of new photovoltaic capacity and 30 GW of new wind power capacity, both reaching a record high.
2. Rapid development of green finance: As of June 2024, China's green loan balance reached 20 trillion yuan, and the stock of green bonds exceeded 3 trillion yuan.
3. The carbon market continues to improve: The coverage of the national carbon market has expanded from the power industry to energy-intensive industries such as steel and cement. In the first half of 2024, the cumulative turnover of the carbon market will exceed 100 billion yuan.
4. Promotion of circular economy model: The new recycling system represented by the "Internet +" recycling model is developing rapidly. In the first half of 2024, the total amount of renewable resources recovered increased by 20% year-on-year.

However, the green and low-carbon transition also faces many challenges. First of all, there is great pressure on the transformation and upgrading of traditional high-energy-consuming industries, which may affect employment and local fiscal revenue. Second, green technology innovation and promotion still need to be strengthened, and some areas are still dependent on imports. Finally, how to equitably share the costs of the green transition is a complex issue.

From the perspective of international comparison, China has ranked first in the world in terms of installed renewable energy capacity and electric vehicle ownership, but there is still a gap between China and developed countries in terms of energy consumption per unit of GDP and carbon emission intensity. For example, China's energy consumption per unit of GDP in 2023 is 1.5 times higher than the OECD average.

In the face of these five trends, governments, enterprises and individuals need to actively respond:

For Governments:

1. Improve regional coordinated development policies and promote the free flow of factors.
2. Increase investment in scientific and technological innovation, and improve the collaborative innovation mechanism of industry, university and research.
3. Accelerate the reform of the pension system and respond to the challenge of population aging.
4. Formulate stronger green and low-carbon policies and promote industrial restructuring.

For Businesses:

1. Grasp the new opportunities for regional development and optimize the industrial layout.
2. Increase R&D investment to enhance innovation capabilities and core competitiveness.
3. Actively respond to demographic changes and develop age-appropriate products and services.
4. Accelerate the green transformation and improve the efficiency of resource utilization.

For Individuals:

1. Pay attention to new trends in regional development and grasp career development opportunities.
2. Establish a lifelong learning concept and continuously improve your skills.
3. Cultivate green consumption habits and practice a low-carbon lifestyle.
4. Plan ahead and plan for your retirement.

These five trends are intertwined and together shape China's future development landscape. We need to look at these changes with a systems mindset, both to grasp the opportunities for development and to address the challenges appropriately. Only the joint efforts of the government, enterprises and individuals can create a new development miracle in this era full of change.

Food for thought: Which of these five trends do you think has the most far-reaching impact on China's future development? Why? What other important trends do you think could have been overlooked?