Chinese economy expects faster recovery

China Daily, December 22, 2022
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China's economy is highly resilient and still has great potential thanks to its strong economic fundamentals. Hence, the Chinese economy is expected to grow in the long run.

But in order to realize national modernization, China has to synchronize its economic development with civilizational development. This will help facilitate China's industrialization, urbanization, informatization as well as social development.

Despite China being the world's largest manufacturing power, some of its industries are not that competitive. As such China needs to upgrade its manufacturing sector — by elevating its goods and services from "Made in China" to "Created in China" — and pursue intelligent manufacturing.

Looking ahead, any further development related to China's manufacturing will be in accordance with the country's urbanization. Judging by international experience, a country enters the stage of modernization once its urbanization rate crosses 70 percent. In China's case, however, the permanent urban population across the country accounts for only about 45 percent of the total population. And if the rate of urbanization increases by 1 percentage point per year, China will need to ensure steady economic development for more than 15 years to basically achieve modernization.

In the long term, strong and diversified supply and demand chains will ensure China's sustainable development and help integrate industrialization and urbanization. As urban built-up areas in the country continue to expand, the increase in urban-rural fringe areas will necessitate the creation of many new districts. The infrastructure in the existing central business districts and the to-be-created new districts will require improved connectivity, for which skilled talents, industrial upgrading and integration would be needed.

Although the supply and demand chains face risks and uncertainties, they still reflect the high potential of China's economy. Yet China needs to deepen reform and widen opening-up, create a high-quality, law-based business environment, and establish a national unified market in which all entities' rights are protected, and unfair competition and monopoly are eliminated. Efforts should also be made to integrate urban and rural development, as well as address the problems caused by the different administrative systems in rural and urban areas.

While foreign enterprises can benefit from the shortening of the Negative List, the local governments should work to strengthen and optimize their management to develop favorable conditions for enterprises, and promote high-quality business.

There is also a need to ensure direct financing in the multi-layered capital and financial market, so big companies as well as small and medium-sized enterprises can realize mutual benefit.

And now that China's real estate sector is past its golden age, the property market is likely to face more uncertainties and challenges — there is even a chance of the real estate market dipping further. True, the real estate market is relatively stable, but the journey to recovery will take time.

Fiscal sustainability is another major concern for China. The separation of central and local governments' fiscal powers and expenditure responsibilities has benefited all sides in recent years. Also, the clear division of responsibilities between them has ensured that they properly exercise their fiscal powers. For example, the central and local authorities have been working together to provide public goods such as healthcare, transportation and compulsory education for the people in accordance with regulations.

There is no denying that some regions face financial constraints due to the impacts of the COVID-19 pandemic, but the country is confident of overcoming the challenges thanks to the valuable experience it has accumulated in the more than four decades since the launch of reform and opening-up.

Therefore, there is enough reason to believe China's economy will recover faster than expected and continue to grow in the post-pandemic era despite facing higher risks and more complicated challenges.

The author is chief economist of the China Academy of New Supply Side Economics.