China's economy to recover next year

Beijing's streets have been quite empty lately due to Covid, leaving public spaces quiet, such as shopping malls and cinemas.

Some netizens are still posting about being Covid positive, complaining the authorities should not have eased controls. Some feel that without opening up, people dared to go out, but with opening up, people are staying home. Some people are even starting to miss the days of strict controls, and are even urging the government to bring them back.

But to the authorities, opening up is not to be argued. Moving out of the impact of Covid and getting the economy back on track is the challenge to be addressed.

The annual Central Economic Work Conference (CEWC) was held in Beijing on 15 and 16 December, the first session following the new leadership installed at the 20th Party Congress. The CEWC indicates shifts and adjustments to China's economic policies for next year, and gives clues to the approach and style of the new leadership.

On a macro level, in terms of principles such as "stability first", "seeking progress in stability", having a positive fiscal policy and steady currency policy, and "houses are for living in, not for speculation", this meeting was the same as the one last year and those before, and this narrative will not change much.

The gist of this year's session included boosting market confidence, growing domestic demand, and improving public expectations and boosting growth confidence by achieving the "Two Unshakeables", which are very different from past years' proposals, which is refreshing.

Since 2020, the Chinese economy has slipped under the impact of internal and external factors such as strict Covid controls. The private companies that make up the bulk of the market are going belly up, and market confidence has been seriously hit. If this does not fundamentally change, the economy and people's livelihoods will fall past the limit and growth will be empty talk.

How can market confidence be boosted? The CEWC plans to start by supporting the growth of China's private sector, which is fairly rare in China in recent years.

State media People's Daily reported on 18 December that during the CEWC, Chinese Communist Party General Secretary Xi Jinping said, "I have always supported private enterprises, and have also worked in localities with relatively more developed private sectors."

The report said Xi introduced the nine guidelines for recruiting talent during his time as secretary of the CCP Zhengding County Committee. In Fujian, Xi's "Jinjiang experience" became a blueprint to guide development elsewhere in China; while in Zhejiang, he supported the growth of private enterprises. After entering the central government, Xi led a private enterprise seminar in 2018, stressing that private enterprises and entrepreneurs are family.

The CEWC report also said that the government must be crystal clear and firm in responding to erroneous comments about whether it will stick to the Two Unshakeables - consolidating and developing the state-owned enterprises while encouraging, supporting and guiding the development of the private ones.

The report said that the government must leverage institutions and law to ensure fair treatment to both state and private enterprises. It should encourage and support the growth of the private sector and private enterprises in terms of policy and public opinion, and protect the property rights of private enterprises and the interests of entrepreneurs according to law. Government cadres at various levels are asked to provide concrete help to private enterprises and solve their problems.

Over the past three years, the Chinese government at all levels has been preoccupied with battling the pandemic. Massive administrative and economic resources had been poured into the country's zero-Covid policy, with little bandwidth left to cater to private enterprises. Coupled with frequent political reshuffles, many new officials cast aside old problems, which have since snowballed and seriously affected the day-to-day business of entrepreneurs and the economic vitality of society.

As China is now entering a new phase of reopening, developing the economy has become the most important task of officials at all levels. Higher-ups have pledged to support the private economy to restore market confidence, which will help revitalise the Chinese economy as soon as possible.

After the CEWC ended, some finance officials and academics became optimistic about China's economic growth next year.

On 17 December at the Annual Meeting on China's Economy 2022-2023 hosted by the China Center for International Exchanges, Han Wenxiu, deputy director of the General Office of the Central Financial and Economic Affairs Commission, said that while the global economy slows next year, the Chinese economy is likely to pick up and form an independent upward trajectory.

He analysed that China's economic rebound can be attributed to three factors: one, the enhancement of epidemic prevention and control measures which will have a significant positive impact on economic recovery and development; two, the compounding effects of stock policies and incremental policies; and three, the base effect - while this year's lower-than-expected economic growth objectively results in a relatively low base, as long as the economy returns to normal next year, the base will be higher from a statistical perspective.

Liu Guoqiang, deputy governor of the People's Bank of China, said that the impact of the property sector on people's livelihoods and assets, macroeconomic cycles and industrial chain stability, as well as government finances and financial markets, is much more significant than other sectors. The property sector is a pillar of the economy and must be kept stable. The previous macro-control of the real estate market has prevented a big rise in prices, but the current plunge in prices has become the main challenge that must be urgently overcome.

According to the economic "blue book" released by the Chinese Academy of Social Sciences last week, China's economy will expand by around 5.1% next year. Wei Jianguo, former vice-minister of China's commerce ministry, even thinks that China's economic growth rate will reach 8% in 2023.

On 17 December, Andrew Tilton, chief Asia-Pacific economist at Goldman Sachs, said at the Annual Meeting on China's Economy 2022-2023 that Goldman Sachs has recently adjusted its 2022 China GDP growth forecast to 2.6%. Following the reopening of the Chinese economy, China's economic growth is expected to double in 2023, and various industries including consumer and service industries will likely improve.

Although it will take some time for China to emerge from the effects of the pandemic, the Chinese economy is set to be back on track or even rebound significantly next year.

This article was first published in Lianhe Zaobao as "中国经济明年满血复活".

Related: Chinese economy in 2023: Worse before it gets better | Will China get its economy back on track in 2023? | China is facing a harsh economic winter | China's economic outlook is not bleak | From zero-Covid to living with the virus: Chinese society's adaptability put to the test | Is China ill-prepared for a surge in Covid cases?