Source: CGTN    Published: 2022-12-17

Editor's note: He Weiwen is a senior fellow at the Center for China and Globalization. The article reflects the author's opinions and not necessarily the views of CGTN.

The annual Central Economic Work Conference held on December 15-16 set the orientation, priorities and a roadmap for China's economic work for 2023. The conference focused on economic stability as the top priority.

The 20th National Congress of Communist Party of China set the central task facing the whole party and nation: "From the day forward, the central task of the CPC will be to lead the Chinese people of all ethnic groups in a concerted effort to realize the Second Centenary Goal of building China into a great modern socialist country in all aspects." To be more specific, by 2035, per capita GDP will reach the level of medium-developed countries.

In 2021, the per capita GDP of China reached $12,556. Taking into account the expected growth in the next 14 years, it will be above $30,000 by 2035. Therefore, China's per capita GDP must grow by 4.73 percent per year in real term up to 2035. 2023 will be the first year in implementing the central task set at the 20th CPC National Congress and the economic performance of 2023 is of crucial importance for the long-term goal.

The first three quarters of 2022 saw China's GDP growth at three percent over a year ago. The fourth quarter of this year is unlikely to see a sharp rebound as the data for November showed somewhat slowdown affected by the COVID-19. Therefore, the top priority for 2023 is to stabilize the overall economy and make steady progress. It is widely expected by Chinese analysts and foreign media that China's GDP growth rate will rebound to above five percent in 2023.

To stabilize and speed up the economic growth, the Central Economic Work Conference decided to implement a proactive fiscal policy and prudent monetary policy. The central government will deploy more fiscal resources to support the local governments through special purpose bond, and provide more tax exemption, deduction or subsidies for small and micro businesses to create more jobs and keep their business running.

The central bank will continue the prudent monetary policy. In sharp contrast to most developed economies, China has kept a low inflation rate and thus does not need to raise bank rate. On the contrary, the People's Bank of China has lowered required reserve rate to provide more liquidities to the economy. The monetary policy also provides more financial resources to targeted small and micron businesses and targeted high-tech and emerging industries.

To stabilize the economy and make steady progress in 2023, the Central Economic Work Conference set a series of focuses. The following three aspects, among others, deserve particular attention.

First, boost domestic consumption. Final consumption constituted 55-69 percent of China's total GDP growth during the past 10 years and is the largest base for stable growth. During the first 11 months of 2022, China's retail sales saw a 0.1-percent negative growth year on year, and it has further declined by 5.9 percent in November, due to the COVID-19. Catering, recreation, travel, passenger transportation, etc. were also largely affected.

Therefore, it is urgent to bring consumption back to normal and resume a steady growth. For this purpose, we need to coordinate precisely the COVID-19 prevention and economic development, to reduce its negative impacts as much as possible, and as early as possible. It is also essential to increase people's disposable income through more job creation, more assistance to individual businesses and backward regions.

Second, develop high technology and emerging industries. The Central Economic Work Conference calls for acceleration of the building of a modern industry system. The economic stability should not rely on the recovery of the existing industries, but on new growth space, i.e., digital economy, semiconductor chips, artificial intelligence, and new energy products.

In fact, in November 2022, while the total industry added value grew by only 2.2 percent over a year ago, the new energy automobiles and solar photovoltaic cells grew by 100.5 percent and 44.1 percent respectively. While total fixed investment grew by 5.3 percent during the first 11 months of the year, the investment was up 23 percent in high-tech manufacturing and up 13.2 percent in high-tech services. Undoubtedly, the energetic investment and production of renewables and high-tech sectors will provide a strong support to the overall economy for 2023 and beyond.

Third, keep firm and continuous opening up to the world. The Central Economic Work Conference calls for greater efforts to attract foreign capital. The multi-shocks and subsequent downside risks in world economy, as well as the U.S. restrictions on exports to Chinese chipmakers, have remarkably increased China's external risks. Under these circumstances, it is crucial for Chinese market to step up opening-up to the world, encourage foreign direct investment (FDI) inflows and maintain a stable global supply chain.

China's total FDI during the first 10 months of the year enjoyed a hefty growth of 17.4 percent year on year to $168.34 billion. The high-tech sector was particularly attractive for foreign investors, up 31.7 percent, with high-tech manufacturing up 57.2 percent and high-tech services up 25 percent. The high FDI growth came mostly from the developed countries: up 106.27 percent from South Korea, up 95.8 percent from Germany, up 40.1 percent from UK and up 36.8 percent from Japan. All those latest developments augur well for a new wave of world capital into China.

Global financial services firm Morgan Stanley has estimated recently that world GDP growth will slow to 2.2 percent in 2023, with the U.S. at 0.5 percent, Eurozone at negative 0.2 percent, and China, on the contrary, at five percent. Bloomberg Institute had a similar estimate: Eurozone will start 2023 with a recession, and the U.S. will end the 2023 with a recession, and China will see an over five percent growth for the whole year. As foreign institutions have a general optimistic prediction on China's economy for the coming year, China has all the reason to keep optimistic and work hard to make it a reality.