Half of China’s Provinces Fall Behind the National Economy

31 Jul 2023

By Fan Qianchan, Xia Yining and Denise Jia

More than half of China’s provinces and provincial-level municipalities reported slower economic growth in the first half than the national economy’s 5.5% expansion, largely reflecting the ongoing slump in the real estate industry and slack global demand for manufactured goods.

Of the 28 jurisdictions that posted first-half results, 15 reported slower-than-average growth. Southeast China’s Jiangxi province brought up the rear with economic expansion of just 2.4%. Ten jurisdictions beat the national economy, led by Shanghai with growth of 9.7%.

China’s GDP grew 6.3% year-on-year in the second quarter and 5.5% in the first half.

Reflecting a low base of comparison last year when the pandemic slowed the economy, most provinces’ growth accelerated in the second quarter from the first. But some provinces experienced slower growth amid weak property investment and a heavier reliance on manufacturing.

Shanghai’s jump in GDP growth was partly because of the low base a year earlier when city was locked down during a Covid-19 outbreak. Southern China’s island province Hainan, with a strong services sector, ranked second with an 8.6% gain. Jilin province in northeastern China ranked third with 7.7% growth, also benefiting from a low comparison base.

Hainan reported 10.3% growth in the second quarter, 3.5 percentage points better than in the first quarter, boosted by a recovery in the tourism industry and consumer spending at restaurants. In the first six months of 2023, tourism revenue surged 42.4% in the island province. Sales in duty-free stores climbed 31%.

As the top focus of China’s opening-up, the province also benefited from the Hainan Free Trade Port, where construction helped drive a 19.9% increase in the province’s first half industrial output. The industrial sector contributed nearly 20% of Hainan’s GDP.

Zhejiang, also with a large manufacturing sector, mainly maintained GDP growth with the services sector. The eastern China province reported a 6.8% GDP gain in the first half. Services jumped 8.4% and contributed nearly 70% of GDP. Industrial output grew by only 4.7% in the first half, significantly slower than the 7.6% average growth in the past four years. The industrial sector still faces shrinking external and weak domestic demand, said Wang Meifu, chief statistician of the Zhejiang Provincial Bureau of Statistics.

The drag of the real estate is significantly higher in some provinces. In the first half of 2023, Guangxi’s real estate development investment fell 43.4% year-on-year. Property development investment in Tianjin fell 46.7%. Chongqing’s real estate development investment fell 21%.

In the first half of the year, China’s investment in property development dropped 7.9% year-on-year, widening from a 7.2% decline in the first five months. Meanwhile, fixed-asset investment, which includes property development investment, grew 3.8% in the first half, driven by a 6% rise in manufacturing investment and a 7.2% jump in government-led infrastructure investment.