Editor's note: 4%, 5%, or 8%? What GDP growth rate will China have in the coming year? Why do experts from different camps have diverse forecasts? Einar Tangen, our current affair commentator, shares his insights. The commentary reflects the author's opinions and not necessarily those of CGTN.
Hi, I am Einar Tangen. And this is Reality Check. China's Central Economic Work Conference issued recommendations for 2023. Don't worry about the official sounding name, it's just part of China's economic plumbing system. It takes the Five-Year Plan and basically adjusts it to the realities facing the country, economically and socially.
It prepares the groundwork for the annual March Government Work Report, which will have more details about specific policies.This has been the strength of China's economic success, step by step, consensus-based planning that moves from concepts to goals, to implementation, then evaluation and, as needed, adjustments.
So as we approach the new year, the conference report is a good window to see where things are going, globally and domestically, in the world's most consequential economy.
Where are we today? Over the last four years, China has been the target of a trade war, a tech war, a new Cold War, and blamed for a regional conflict in Ukraine. In addition, China and the world have been dealing witha global pandemic, massive debt increases, growing economic inequalities, climate change, rampant inflationand logistics problems due to a combination of the issues above.
It hasn't helped that the U.S. has panicked. The Fed's extreme fiscal and monetary tightening has forced other countries to follow suit, pushing the world towards global economic recession in the name of America First.
Unfortunately, this is the same thinking that puts China at the center of America's negative narrative. China is responsible for everything wrong with the world from the pandemic to America's declining competitiveness, to the conflict in Ukraine, and the global economic decline. In America and the UK in particular, the repeated narrative about China is that it has been on the verge of collapse for the last 25 years.
While the reality is, over the last 25 years China has become the world's second largest economy, by growing the world's largest middle class and eradicating extreme poverty.
A perfect example of this is: Three weeks ago, the narrative was China was about to collapse because it hadn't opened up. Today, the narrative is, China is about to collapse, because it opened up. Neither reflects the reality that China's pandemic policies have allowed it the luxury of opening its society and economy, when it was safer to do so.
The problem for Washington is, China's success is a challenge to the notion that only liberal democratic capitalism is a legitimate social, political and economic model. So, it's not that China is in danger of failing, just there are those who want it to fail.
Why? Because they don't want to have to examine their assumptions, or the justifications they used to start wars, interfere in the affairs of other governments, and enrich themselves.
If, for instance, the basis of Western colonial actions over the last 350 yearswas simply about using, first religion, and then ideology, to obtain wealth and power by force, they would be exposed as nothing more than hypocritical narcissists.
Why this long preamble before discussing China's 2023 economic outlook? Because what happens in 2023 is connected to what came before. So let's get into the specifics of 2023 and then you may understand the point I am driving at.
As I said, China held its annual work conference, where it discussed the policies necessary to implement the current Five-Year Plan goals.
The highlights of the report were about how to stabilize economic and social growth. On the positive side: The report was clear about encouraging private enterprises, micro, small and medium business entities, real estate, consumption, needed tech development, efficient production, digital economy and a stable Renminbi.
On the negative side, there was a desire to discourage speculative bets that don't create jobs or economic impact and rein in local government debt.
The tools proposed: using targeted expansionists fiscal, monetary programs and policies. Or in other words, supporting the economy where they think it's needed.
"We need to encourage and support the private sector economy and private enterprise in terms of policy and public opinion." That is the statement that was released in the report.
The hope is that changes to how China responds to the pandemic will usher in a strong economic V-shaped rebound, which is a priority. As the economic data for November showed retail sales down 5.9%. Industrial production grew but only at 2.2%, less than half of October's growth. Investment in the property sector, which accounts for as much as 30% of China's GDP, plunged by 9.8% in the first 11 months of the year. Property sales by value plummeted by more than 26%. Unemployment rose to 5.7%, a six month high.
Given everyone is working off the same data, you would expect a somewhat close alignment of forecasts, but you would be wrong.
Basically there are three camps. The developed nations and their institutions recently revised their 2023 China growth estimates downward: World Bank down to 4.3%, the IMF down to 4.4%, the Asian Development Bank down to 4.2%. A fairly tight set of economic target groupings.
Then we have the private sectors' 2023 predictions, all revised upwards: The Economist Intelligence Unit up to 5.2%, Morgan Stanley up to 5.4%, Golman Sachs up to 5.2%, PwC up to between 5% - 6%. All of them cited the faster pace of reopening and continued stimulus measures in the Conference Report.
The last group are the usually very conservative Chinese economists who are predicting a major turn around. "The GDP growth rate will reach 8 percent," said Wei Jianguo, vice chairman of the China Center for International Economic Exchange and former vice minister of the Ministry of Commerce. This sentiment was echoed by Jia Kang, former director of the China Academy of Fiscal Sciences, and Yao Yang, dean of the National School of Development at Peking University, at a Global Times Annual Conference that was held on December 17.
So why the different forecasts? For the World Bank, IMF and ADB, they see the past and the potential problems: worsening U.S.-China relations, U. S. containment efforts. Like the October Biden administration export controls, banning Chinese companies from buying advanced chips containment efforts and chip-making equipment without a license. The restriction of some U.S. citizens or green card holders to be involved in the "development or production" of chips at certain manufacturing facilities in China.
The Economists Intelligence Unit, Morgan Stanely, Goldman Sachs, and PwC, they see the present: the change in COVID policies and the conference report policy indicators.
The Chinese economists see the future: an opportunity to implement the conference report and get China back on track with its dual circulation strategy, where domestic consumption and manufacturing efficiency drive the economy and attract outside investment.
Who will be right, only time will tell, but those who look forward tend to accomplish more than those who look at the past or the present.
Script: Einar Tangen
Editors: Liang Zhiqiang
Producer: Wang Ying
Chief editor: Wei Wei
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