Michelle ThompsonLeading Chinese economists expressed optimism on Wednesday about the direction of the second-largest economy in the world, maintaining key interest rates despite signs of improvement in some sectors, such as services.
In contrast to predictions from the Asian Development Bank and the Organization for Economic Cooperation and Development, which suggest that China’s economy is anticipated to continue to deteriorate, authorities spoke in an upbeat manner at a news conference in Beijing.
Cong Liang, deputy chairman of the National Development and Reform Commission, the top planning body in China, told reporters that the country’s tenacity in the face of previous crises was cause for optimism and that rising manufacturing output and tourism numbers indicate the economy is recovering.
Cong stated in the briefing, which was posted online, that “facts have fully proven that the decision-making arrangements of the party Central Committee and the State Council (China’s cabinet) are correct and the macro-control policies are effective.”
China’s economy is still impacted by local and international forces three years after the coronavirus pandemic caused disruptions, and “economic recovery will inevitably be a process of wave-like development and tortuous progress,” he conceded.
Leader Xi Jinping stated in a speech that was published last month in the Communist Party’s official magazine Qiushi: “We must maintain historic patience and insist on making steady, step-by-step progress,” when it comes to managing the economy.
He claimed, in a statement evocative of earlier times, that the West’s quest of worldly abundance resulted in “spiritual poverty.”
However, China’s leaders have taken action to support growth and promote investment and expenditure. This includes relaxing limitations on real estate transactions in smaller cities and lowering reserve requirements for some banks.
The People’s Bank of China maintained significant interest rates steady on Wednesday as was predicted. The five-year LPR is 4.2%, and the 1-year loan prime rate is 3.45%. Officials have stated that they will evaluate the results of recent actions taken to support commercial activity.
Markets did not appear to have responded positively to the guarantees; on Wednesday, the Shanghai Composite index fell 0.5%, and the Hang Seng in Hong Kong fell 0.6%.
The pandemic and a catastrophic property market crisis that has left real estate developers battling with enormous debts have both had a devastating impact on the economy. Housing and other real estate patterns influence many other aspects of the economy, including consumer propensity to spend more money, as is true in many other nations.
One in five young Chinese are now unemployed as a result of job losses that occurred both during and after the pandemic, severely reducing consumer demand.
The revised regional outlook report from the Asian Development Bank reduced its prediction for China’s growth in 2023 to 4.9% from a 5.5% annual pace of increase in the first half of the year. The adjustment was due to “softening momentum in domestic demand, headwinds from weaker global demand, and the property sector correction,” it was stated.
The OECD cut its projection for global growth on Tuesday, lowering it from 2.7% in 2024 to 2.7% in 2024 due to the downturn in China and the real estate market.
The American Chamber of Commerce in Shanghai and the European Union Chamber of Commerce in China both released surveys of foreign companies on Tuesday that showed confidence among foreign investors and businesses operating in China has decreased despite the end of disruptive “zero-COVID” policies late last year.
“We were all a little bit on a sugar rush in the spring. According to the president of the EU Chamber, Jens Eskelund, who spoke to reporters in Beijing, “China was opening up, we were expecting that everything would be great and that 2023 would be a year where we would all see very solid growth across all industries.”
It has undoubtedly been oversold and a difficult year for many of us, he said. “The outlook is rather hazy across a number of industries.”
Both organizations urged the Chinese government to make policies more clear, claiming that ambiguity is a rising issue.
Chinese authorities and state-run media appear to have intensified their efforts to dispel worries expressed by what the official Xinhua News Agency referred to as “Western naysayers.” They point out that China’s planners have been directing the economy toward a more resilient growth model that relies more on high-value technologies and consumer spending and less on large-scale construction expenditure.
“I think that there will be no obstacles that China cannot overcome in its development as long as the whole country is united and as long as we insist on doing our own thing well,” Cong added.
Xinhua noted an improvement in retail sales in August in an editorial that was published last week. Additionally, there were indicators of increased factory output.
“China’s economy is transitioning from high-speed growth to high-quality growth, buoyed by developing competitive businesses and sectors. This is strengthening the economy’s resilience, it claimed.
A trend favoring state-owned enterprises over the private sector firms that employ the majority of people and generate the majority of business activity, according to economists, is one reason that is impeding growth.
The planning organization NDRC said earlier this month that it had established a “private economy development bureau” to aid private businesses.
