Editor's note: Liu Chunsheng is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinion, and not necessarily the views of CGTN.

The Central Economic Work Conference has been held from December 15 to 16 to set the tone of China's macroeconomic policies in 2023. It has sent a clear signal to all market players and even the whole world that development is still the top priority and economic construction is still the main task of China, so as to boost confidence of all parties.

China released its macroeconomic indicators of November recently. Consumption, investment and export slowed down mainly due to the economic downturn of developed economies, waves of pandemic and the sluggish real estate market.

Looking back on the whole year of 2022, China's economy can be described as tough. The COVID-19 pandemic led to lockdown in many cities, resulting in production and operation interruption in many industries.

Since November, with the continuous optimization and improvement of pandemic prevention and control measures throughout the country, the adverse factors that once disturbed the business and people's lives are gradually weakening, and the urgency to revive the economy is becoming increasingly prominent.

At the meeting of the Political Bureau of the Central Committee of the Communist Party of China held recently, it was emphasized to "do a good job in economic work next year," "better coordinate pandemic prevention and control and economic and social development, better coordinate development and security, comprehensively deepen reform and opening up, and vigorously boost market confidence," which fully demonstrated the high-level determination to resume the operation of the national economy in 2023.

The GDP growth rate in the first three quarters was 3 percent. According to the prediction of the IMF World Economic Outlook in October 2022, China's economic growth rate will reach 3.2 percent in 2022, which is the same as the world average growth rate. However, judging from the economic performance in October, November and the first half of December, the GDP growth rate in the fourth quarter is not optimistic, and there are still huge challenges to achieve this goal. The necessity and urgency of expanding domestic demand are rising, and it is time to make every effort to get the economy well on track.

However, economic recovery can be expected in 2023. The four major factors that suppressed China's economy and capital market have improved marginally: the U.S. Federal Reserve's interest rate hike has slowed down, the pandemic prevention policy has been continuously optimized, the inflection point of the real estate policy has emerged, and the space for a new round of monetary easing and economic stimulation policy has been opened.

Recently, the Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035) was jointly released by the Communist Party of China Central Committee and the State Council. The outline will be conductive to expanding effective investment, promoting consumption and boosting the new development paradigm when facing the turbulent international environment and arduous tasks of strengthening domestic reform, development and stability.

According to international experience, an adjustment period of about a quarter is needed after the optimization of pandemic prevention policies. If there is greater policy strength in expanding domestic demand, boosting new infrastructure and energy, stabilizing the property market, issuing consumer vouchers, and boosting the confidence of private economy, it is expected that the economy will gradually recover since the second quarter of 2023.

The pandemic prevention and control measures may be more optimized, which will create good conditions for the recovery of service consumption and offline consumption in 2023. Businesses such as accommodation, catering, tourism and transportation will become the main driving force for the recovery of consumption. The real estate market will gradually pick up, driving the consumption of furniture, household appliances, room decoration and other housing related products back up.

At present, the foundation for economic growth is very fragile. The continued implementation of a package of policies and follow-up measures to stabilize the economy will further promote the business recovery. 

A series of positive factors such as infrastructure investment will support the economic pickup in 2023, but uncertainties and instability still exist. Repeated pandemic outbreaks will restrict the confidence of Chinese residents in consumption and business investment.

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