Photo: AP.
According to the data published by the Chinese government on January 17, 2023, it is believed that China’s economy will have a strong recovery in 2023, thanks to appropriate policies as well as the mitigation of disease control. Accordingly, a quick recovery can be seen in industries such as tourism, aviation, retail, logistics, and industrial production.
It is not too difficult to see that these positive predictions are not entirely unfounded. Currently, China’s driving force for economic growth is still consumption, investment, and exports. During the last phase of implementing the zero-Covid strategy, the consumption index in China has seriously declined and impacted directly its economic growth. But the recently announced reopening policy will be the first driver to stimulate domestic demand, whereby the growth rate of consumption is expected to increase from 0.2% in 2022 to 7% in 2023. In addition, "pent-up" savings of households, announced to be 15.46 trillion yuan once freed up, will quickly become the driving force to increase the consumption index in China. The recent “strategic implementation plan to expand domestic demand in the period 2022 to 2035”, promulgated at the end of December 2022, also shows China’s determination to boost domestic demand.
Due to these indicators, the United Nations' “World Economic Situation and Prospects 2023” has forecast that China’s overall growth can increase by approximately 4.8% in 2023 [1]. Meanwhile, economies such as the US, Europe, and even several developing countries are said to be negatively impacted by inflation, high food, and energy prices, etc. Others predictions all point in the same direction: The International Monetary Fund (IMF) has 4.4% [2]; the Bank of Switzerland (UBS) 4.5% [3]; Bank of America (BOM) 5.5% [4]; and Morgan Stanley a 5.7% increase [5]. It is affirmed by the majority of these predictions that China’s economy is likely to accelerate from this year’s second quarter when the epidemic is under control and the state's supportive policies begin to take effect.
However, despite many positive predictions about China’s economy, there are still numerous concerns, and even pessimistic assessments about China's economic prospects after the reopening period.
Some experts believe rising power competition will take its toll on China’s development as it affects the environment conducive to growth. After the US House of Representatives approved the establishment of the "Special Committee on Strategic Competition between the US and China" and the Biden administration released a series of foreign policy documents characterizing China as a long-term threat, rivalry looks to be heating up.
On top of that, developments in Ukraine are expected to drag one third of the world’s economies into recession this year. According to Professor Xu Minqi (Institute of World Economics, Shanghai Academy, China), China’s economy will be negatively impacted when the world’s growth falls. Firstly, as one of the world’s major importers of energy and food, China will face the pressure of import inflation. Secondly, China’s export index will be negatively influenced as the deceleration of the US and Europe's growth will decrease the import demands. He claims that China’s economy is now facing a challenging external environment [6].
Professor Xia Ming (City University of New York) even considers that China’s decision on lifting the blockade order was too “hasty” as its economy was not well-prepared, thus possibly making the new wave of Covid spread at a more tremendous speed and pushing Chinese government into a new state of anarchy.
In addition, three years of implementing the zero-Covid policy has caused foreign investment capital - one of the leading factors contributing to the Chinese economy - to shrink and be diverted from the mainland. The unemployment rate in China between the ages of 16-25 is still at a double-digit height, which makes it difficult for the government's stimulus policies, no matter how strong, to achieve their optimum.
Therefore, IMF Director Kristalina Georgieva also states that the possibility of China’s economy in 2023 being worse than in 2022 cannot be completely ruled out [7].
However, no matter which direction the Chinese economy will head towards in the future, it cannot be denied that the reopening of the Chinese economy is bringing a new wave of fresh air, breathing life into the almost isolated economy in the past three years. This is a good sign and can partly relieve the fear of a global recession, especially in the context that developed economies are showing signs of stagnant growth.
Hoang Lan, Researcher at the East Sea Institute, Diplomatic Academy of Vietnam. The article represents the author's personal views, not her affiliation.
The post is originally published here.
Translated by Nguyen Tien Dat
Edited by HD
[1] https://news.un.org/zh/story/2023/01/1114487
[2] http://cacs.mofcom.gov.cn/article/gnwjmdt/db/imf/202302/175640.html
[3]https://iccs.org.tw/NewsContent/35
[4] https://www.chinatimes.com/newspapers/20230119000190-260203?chdtv
[5] http://paper.people.com.cn/rmrbhwb/html/2023-01/28/content_25961142.htm
[6] https://www.sass.org.cn/2023/0116/c1210a499543/page.htm
[7] https://info.51.ca/articles/1174111
