Higher growth forecast due to China
Editor's note: The International Monetary Fund has raised its forecast for China's economic growth this year to 5.2 percent, which is 0.8 of a percentage point higher than in October last year, in its latest World Economic Outlook Update. Four experts share their views on China's economic prospects and global economic trends in 2023 at a recent forum. Excerpts follow:
Promoting new spirit of global cooperation
The global economy has been facing big challenges. Growth is too low and inflation too high. But we are turning the corner, and global growth is expected to bottom out this year with inflation reaching its peak. But can we also turn the corner on a renewed spirit of international cooperation?
Emerging market economies have been growing faster than advanced economies for decades and are the main drivers of global growth. This year, China is forecast to be the single largest contributor to global growth, accounting for about onethird (or 1 percentage point of our fore-casted 2.9 percent global growth). Faster growth in China also lifts growth in other countries as it imports more goods and Chinese tourists travel to places across the world. We estimate that this spillover effect can add, on average, 0.3 percent to the GDP of other countries for each 1 percentage point faster growth in China.
A renewed spirit of international cooperation can also provide a welcome further lift to the global economy. One area is trade. Since 2017, there has been a notable increase in trade restrictions. Steps to again make trade an engine of growth include rolling back distortionary subsidies and trade restrictions imposed in recent years; and, strengthening the World Trade Organization, including new market-opening agreements. In addition, countries should carefully weigh the costs, at home and abroad, of national security measures on trade and investment.
Another area is support for low-income countries. During the COVID-19 pandemic, the global economy experienced significant GDP scarring, especially low-income countries. Last year's rising global interest rates, strong US dollar, and rising food prices added to the strain on low-income countries.
Now, some 15 percent of low-income countries are in debt distress and 45 percent are at high risk of debt distress. We have seen progress in this area, including agreement on the G20 Common Framework for debt treatment. Making the process more certain and faster would serve the interest of both creditors and debtors.
Last, but certainly not least, is the climate crisis. Climate change may be the best example where collective global action is vital to solve a crisis.
Steven Barnett, senior resident representative, IMF China
Structural reforms to facilitate growth
Since December 2022, China has been adjusting its pandemic prevention policy, which increased the short-term optimism. Mobility and retail sales have recovered from pandemic-lows. People's willingness to travel and the overall inter-city migration index during the Spring Festival period have exceeded the pre-pandemic level. Manufacturing and service activities have picked up since January.
These factors prompted the International Monetary Fund to raise its forecast for China's economic growth in 2023. Some challenges remain. One, is the risk of another COVID-19 wave. Preemptive moves to re-accelerate vaccination, secure treatments, and ramp-up healthcare capacity could help guard against this risk.
The government has stepped up efforts to support the property sector. In addition, structural reforms to gradually bring the property sector to a more sustainable size would help buoy China's macroeconomic performance and promote financial stability.
Given the medium-term challenges faced by China, lifting productivity growth, improving business dynamism, and actively addressing population aging through market-oriented structural reforms would unleash the country's medium-term growth potential.
Li Xin, deputy resident representative, IMF China
Focus on balance sheet and real estate market
At the end of last year, global sentiment was pessimistic due to concerns over possible recession in the European Union and the United States because of their central banks' rate hikes, as well as the uncertainty over China's pandemic recovery.
However, since January, global sentiment has significantly improved as the negative economic factors of 2022 are disappearing: inflation is declining, the US Federal Reserve is easing rate hikes; and the Russia-Ukraine conflict, many say, will have a smaller-than-expected impact on the global economy. Most importantly, China is rapidly recovering from the pandemic. As a result, the International Monetary Fund revised up its global growth forecast in January.
Yet this is not the time to be overly optimistic as the current recovery could be a "scarred" recovery, as some factors could have long-term effects on the economy. The impacts of three scars - global inflation, China's balance sheet, and its real estate - on economic recovery cannot be underestimated.
The central banks of the US and eurozone have faced challenges since the 2008 global financial crisis, with populist movements questioning their efficacy, making the rebuilding of trust difficult. The last two years' unprecedented high inflation and low growth have further eroded their credibility. So the battle against inflation may be tougher than expected, and requires central banks to make more efforts, show more determination, and seek more creative solutions to the problems.
Apart from taking steps to overcome the challenging external environment, China should also pay attention to its balance sheet and its real estate market, which may also hamper its economic performance in 2023.
China's asset-liability ratio, of local governments, enterprises and households, has been under strain, limiting the effectiveness of monetary policy.
To mitigate the risks, policymakers should consider taking targeted measures such as reducing taxes and fees to ease burdens of businesses, or subsidizing businesses and workers, which could be more cost-effective than broad-based stimulus measures through investment.
Guo Kai, a member of the China Finance 40 Forum, an influential financial think tank in China
Encourage private sector to continue to innovate
Compared with achieving a healthy economic growth in 2023, realizing sustainable development in the long run may be a bigger challenge for China, as its population ages and its external market environment becomes less open and friendly. The country must therefore adopt a more innovative and efficient approach to maintain growth.
Over the past decade, China has seen an explosive growth in the number of patents, with some surpassing the number filed in the European Union and Japan, even rivaling those in the US, while the quality of the patents has also improved. But there has been a noticeable slowdown in the growth of patents since 2018, with some people attributing it to the trade war launched by the US, which has made China's reliance on foreign technology and innovation a major challenge. The declining confidence of the private sector in recent years also played a significant role in the slowdown of innovations in China.
To maintain the momentum of innovation, it is important for China to maintain an open attitude toward innovation and to encourage private enterprises to promote innovations.
More important, China should not abandon economic globalization, and should always take safety considerations into account. Only in this way can China help create a new globalized system that is more equitable and allows for continued investment and trade in technology.
Huang Yiping, deputy dean at the National School of Development, Peking University
The views don't necessarily reflect those of China Daily.