Lujiazui skyline in Shanghai Photo: CFP
Editor's note:
China's economy steadily recovered in 2023, exceeding international expectations. In the face of an unstable global economy, China continued to pursue progress while maintaining stability. China continues to advance its economic recovery while appropriately preventing and managing risks. In the process, it continues to deepen reform and expand opening up. New growth drivers and competitive advantages continue to emerge. This year, with the introduction of further support policies, China's economy is expected to maintain stable positive momentum. The Global Times invited two Chinese economists to discuss economic opportunities in 2024.
Despite considerable challenges, the global economy achieved several important goals in 2023, including moderate growth and low inflation. Global GDP growth in 2023 was significantly higher than originally expected, and most countries' economic performance was better than originally expected.
We expect this improvement to continue into 2024. In 2023, the number of job openings decreased, the unemployment rate did not increase significantly, and the supply and demand balance in the labor market was stabilizing. Job opening rates in other major economies around the world remain high relative to levels suggested by economic fundamentals, indicating that there is room for further improvement.
Inflation is expected to fall sharply in 2024. Since the end of 2022, core inflation in all G10 countries except Japan has fallen from 6% to about 3%. Central banks have completed most of the adjustments aimed at curbing inflation, and nominal wage growth has begun to slow. Therefore, a resurgence of inflation in 2024 is unlikely.
Disposable income in developed markets is expected to increase significantly given falling inflation and a strong labor market environment. However, like the divergence between Europe and the United States in 2023, the divergence in 2024 is still evident even if the tables were reversed. Real income growth in the US is expected to slow from 4% in 2023, while there will be more room for real income growth in the euro area and UK as the impact of the Russian gas supply shock subsides has been done.
Furthermore, monetary policy tightening will be gradually lifted as inflation stabilizes. While there will still be an impact on GDP growth in the first half of this year, the impact on the economy will be smaller than in 2023. If the growth outlook is unfavorable, rate cuts could be a policy option. Some emerging economies that started raising interest rates earlier have started lowering their policy rates, and they may continue to do so this year.
The manufacturing industry is expected to recover from the downturn in 2023. Manufactured exports from major exporters such as the United States, Japan, South Korea and Southeast Asia shrank sharply last year, and the World Bank predicts global trade growth will slow further. The export growth rate in 2023 will reach 1.7%, and in 2022 it will be significantly lower than 6%. In the second half of 2023, global trade will slowly begin to recover, with export growth in the United States, Japan, South Korea, India, and Vietnam all reversing. From negative to positive. Global trade growth in 2024 is likely to follow a moderate growth pattern.
In 2023, China successfully overcame many external headwinds, overcame domestic challenges, and made progress in deepening reform and opening-up. The country also introduced effective macroeconomic regulation and prioritized expanding domestic market demand, optimizing economic structure, building confidence, and effectively managing and resolving risks. The economy experienced a strong recovery in her 2023.
The Organization for Economic Co-operation and Development (OECD) raised its forecast for China's economic growth rate in 2023 to 5.2%, and the IMF also raised it to 5.4%. Several financial institutions, including Morgan Stanley, Goldman Sachs, Citigroup, UBS, Deutsche Bank and ANZ, also raised their growth forecasts to 5-5.7%. This shows that China remains a major driver of economic growth in the Asia-Pacific region and the world.
In 2023, China's economy underwent structural transformation and sophistication, and housing consumption showed remarkable growth among the three main driving forces. Despite the lingering effects of the COVID-19 pandemic and the lag in recovery, in-person consumption and service consumption recovered relatively quickly. In addition, new types of consumption and consumption upgrading, such as digital and green sector exploration, cultural tourism, and sports, also maintained strong momentum.
From an export perspective, the “new three products” of electric vehicles, solar panels, and lithium batteries are becoming new growth drivers for China's exports. Sales of these products are rapidly increasing, which is a result of China's technological innovation and industrial optimization and sophistication.
As the only country with all categories of the United Nations industrial classification system, China has all kinds of industrial products and established industries and supply chains needed to produce the “new three products”. With China's continued role in innovation leadership and deepening green transformation, high-tech industry is injecting new momentum into China's economic growth.
With inventories consistently thinning, China's manufacturing industry is showing strong recovery momentum. Industrial production has entered the “inventory replenishment” stage.
From an investment perspective, the new strength lies in manufacturing, infrastructure and exports, as well as the development of emerging service industries. The share of high-tech service industries in fixed asset investment is only slightly lower than that of real estate investment. The high-tech service industry maintains stable growth, which is beneficial not only to the optimization of the country's investment structure, but also to the further transformation and upgrading of the manufacturing industry.
From the perspective of economic and trade relations, relations between China and the United States are becoming stable, while economic and trade relations between China and emerging markets continue to strengthen. In the first eight months of 2023, the share of China's total exports to emerging and developing countries rose to 44% from 25% in 2007. Amid the complex global situation, this will further enhance the resilience of China's economic cooperation.
To prevent and counter risks, some Chinese provinces have issued special purpose refinancing bonds worth about 1.5 trillion yuan ($210 billion) since October 2023. The funds raised will primarily be used to repay outstanding debts owed by local governments to businesses. The issuance of these special purpose refinancing bonds represents a new step in local government debt prevention and resolution.
International financial institutions such as UBS and Goldman Sachs generally predict that emerging markets will recover rapidly this year, with China's economic development being a key driver.
In 2024, the economy is expected to expand further due to the implementation of a series of policies by the Chinese government and the expansion of private investment. China's economy will maintain medium- to long-term growth, and the government will strengthen efforts to stabilize growth and support the economy.
In 2024, the green economy, digital economy and intelligent economy will become the new “three engines” driving growth, and consumption upgrading will also accelerate its pace, potentially boosting economic growth. With a weaker dollar and stronger policies, China's economic vitality will be maximized and economic growth will gradually return to normal.
In 2023, the global economy faced a series of disruptions. Volatility, uncertainty, and unpredictability may become the new normal in 2024. The political turmoil brought about by multiple national elections is bound to have an impact on the global political and economic situation.
The upcoming US election could create uncertainty about the pace of global economic recovery. Europe faces the dilemma of regional conflicts and energy transition, and faces difficult choices between inflation and deflation, and between lowering interest rates and maintaining current levels. The outlook remains highly uncertain.
In the face of this complex and ever-changing international situation, China will continue its strategic efforts, adhere to the final mindset, respond calmly, and focus on its own problems. China will respond with its own conviction to the uncertainty of changes in the external environment.
The author is an economist and professor at the Belt and Road School of Beijing Normal University. bizopinion@globaltimes.com.cn
