Assessing The State And Outlook Of China’s Economic Recovery – Analysis


By He Jun*

China’s Lianghui, or the Two Sessions, the meetings of parliament and the political advisory body, will kick off on March 4, and all eyes are on possible significant new changes, policies, and priorities of the country that will follow suit this year. In terms of the economy, the focus of the meetings is on the stabilization of the economy.

Since the start of 2022, ANBOUND’s researchers have cautioned about the risk of China’s economic slowdown and resilience fracture. We highlighted the importance of stabilizing the economy, especially given the economic shocks caused by several COVID-19 outbreaks last year. Nonetheless, our call for adjustments to China’s COVID-19 control policies last August did not receive sufficient attention from the relevant policy departments.

Yet, the situation has eventually caused policy adjustment in China, where it relaxed and tweaked its COVID-19 measures in November last year, and in its Central Economic Work Conference, an annual meeting that set the national economic agenda, held in mid-December 2022, the focus for the year 2023 is to stabilize the economy.

Now, more than two months into 2023, China has been through the initial mass novel coronavirus outbreaks once its control measure was loosened. Then the ordinary Chinese people had their first open Spring Festival, or Chinese New Year, in three years. Although some losses were caused by infection, the country did not experience the feared large-scale outbreak, nor did the society become chaotic.

As it stands, the state of the Chinese economy in 2023 and beyond, and its potential for achieving stable growth, will impact investment decisions and development strategies for businesses. However, while China’s policies are on the right track, this does not automatically guarantee a smooth and stable economic recovery. In fact, revitalizing the economy will be the country’s biggest political challenge this year and in the coming years.

With the Chinese economy already fragile, any policy that neglects economic growth could lead to a repeat of past mistakes. This issue, the country’s biggest political challenge, is not only related to the sustainability of the economy and job security for ordinary Chinese people but also to China’s ability to withstand international pressure, particularly the “encirclement” of the West driven by the United States. Additionally, it is related to whether China can increase its investment in research and development and promote industrial innovation in the technology sector, which is being restricted by the U.S.

Although quite a number of research institutions, both within China and in other countries, are optimistic about China’s economic recovery and predict that the economy will rebound to a growth rate of 5% or higher this year, ANBOUND’s researchers hold a more cautious and neutral expectation.

Firstly, while there will be a rebound in statistical data in 2023, especially in some consumption-related industries such as food and beverage, tourism, transportation, hotels, and entertainment, the market still needs to rationalize the apparent rebound in the overall economy and some industries. Additionally, due to the low base effect, it is not very meaningful to focus solely on economic growth in 2023. Economic growth over a longer period should be given more emphasis, such as combining the economic growth of 2024 and 2025. Observation for a period of three years will provide more objective judgments.

Secondly, although the Chinese economy has shown signs of recovery, there are still serious internal problems within the economic system. Even before the COVID-19 pandemic, the Chinese economy had already been on a downward trajectory. In addition, the pandemic has further worsened the situation at the industrial and enterprise levels within the country. While tourism and consumption have performed well this year, they do not represent the core of the Chinese economy. China is primarily a production-oriented society, with production activities being the backbone of its economy. Certain industries such as real estate, some manufacturing sectors, foreign trade, market demand, future prospects, and real debt risks are not showing optimistic development.

Thirdly, the internal and external environment of the Chinese economy is facing significant challenges. Externally, the geopolitical environment continues to deteriorate, the global supply chain is being restructured, and the transfer of orders from Chinese enterprises is taking place, The West is also pushing for a decoupling of technology from China, and the latter’s channels for obtaining technological advances from the external world are being blocked. These and other factors will have a negative impact on the Chinese economy, which is highly dependent on the global market, particularly on its manufacturing industry. Looking at the internal environment, although the Chinese central government is constantly emphasizing “domestic circulation” and the “unified large market,” introducing policies to stimulate consumption, improve supply, and boost domestic demand, various contradictions are becoming factors that hinder economic growth. These include slow reforms, weakened market confidence, increased financial and debt risks, depressed consumer markets, the intersection of aging and negative population growth, and an increasing fiscal deficit. Many internal and external problems that are unfavorable to the economy are intensifying, which will affect the stability and degree of China’s economic recovery.

Final analysis conclusion:

China has returned to a state of normalcy after the pandemic, which has been a crucial short-term factor in the recent economic recovery. However, due to the complex political and economic environment both domestically and internationally, as well as the overall downward trend, the sustainability of China’s economic recovery still faces challenges.

*He Jun is a researcher at ANBOUND


Anbound Consulting (Anbound) is an independent Think Tank with the headquarter based in Beijing. Established in 1993, Anbound specializes in public policy research, and enjoys a professional reputation in the areas of strategic forecasting, policy solutions and risk analysis. Anbound's research findings are widely recognized and create a deep interest within public media, academics and experts who are also providing consulting service to the State Council of China.

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