December meeting provides a more positive evaluation of economy

Editor’s note: Wang Qing is chief macroeconomic analyst at Golden Credit Rating International. The article reflects the author’s opinions and not necessarily the views of CGTN.

The meeting of the Political Bureau of the Communist Party of China Central Committee was convened on December 8 to analyze and discuss the economic work for 2024. Regarding the situation assessment, the meeting emphasized that “China’s economy is recovering and improving”. Compared to the July meeting, which assessed the economic situation as “overall recovering and improving” while facing “new challenges in current economic operations”, this meeting has made more positive and optimistic assessments.

The meeting noted that this year, China has “withstood external pressures, overcome internal difficulties… and China’s economy is recovering and improving”. “External pressures” primarily refer to the evident slowdown in economic growth due to factors such as substantial interest rate hikes by the U.S. and European central banks prompted by high inflation and persistent international geopolitical risks. 

As per the October forecast by the International Monetary Fund, the global GDP growth rate in 2023 is projected to be 3.0 percent, significantly lower than the previous year’s 3.5 percent. 

Against the backdrop of a decline in external demand due to global economic slowdown, China’s exports (measured in USD) registered a year-on-year decrease of 5.2 percent from January to November, in contrast to a 7.6 percent rise during the same period last year. Net exports in the first three quarters pulled down the country’s GDP growth rate by 0.7 percent, whereas it contributed positively by 1.0 percent during the same period last year. 

In addition, this year, some Western countries, represented by the U.S., have intensified a “small yard and high fence” style blockade against China in the high-tech field, implementing the so-called “de-risking” moves. As a result, China’s economic development is under considerable external pressure. 

“Internal difficulties” mainly refer to the continued downturn in the real estate industry this year and the lingering “scarring effect” brought about by the three-year COVID-19 pandemic. These situations continue to impact resident spending and private investment, leading to insufficient domestic demand.

Nevertheless, following the deployment of “enhanced macro-policy control” and “reinforced counter-cyclical adjustments and policy reserves” in the July meeting, comprehensive efforts have been made in growth stabilization policies, resulting in a stronger momentum of macroeconomic recovery in the third quarter. 

In this context, the two-year average GDP growth rate in the third quarter escalated to 4.4 percent, 1.1 percent faster than in the second quarter. With sustained impetus from macroeconomic policies, the economic recovery trend has maintained in the fourth quarter. It is predicted that the year-on-year GDP growth rate in the fourth quarter could reach 5.3 percent, maintaining a two-year average growth rate of around 4.3 percent. 

The annual GDP growth rate is also expected to reach approximately 5.3 percent, so there is no doubt we will achieve the goal of “around 5.0 percent” growth set at the beginning of the year. This provides the basis for the meeting’s judgment that “China’s economy is recovering and improving”. Therefore, in comparison to the July meeting, this session provided a more positive and optimistic evaluation of the economic situation.

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