China Economic Outlook 2023: Clearer – after next week’s key Party Congress
China, the world’s second-largest economy has had a tough year so far.
Its biggest challenge is the crashing property market. Real estate is the country’s traditional growth engine, accounting for a fifth of GDP.
The danger is that the real estate crisis will spill over into the financial sector, endangering investment.
Another issue is the negative economic impact of President Xi Jinping’s regulatory crackdowns and extreme zero-Covid policy.
The International Monetary Fund forecasts published this week show that China’s GDP will grow by just 3.2% this year, down from 8.1% in 2021.
Yet as the developed world suffers a slowdown next year prompted by rising interest rates and higher energy costs, China offers a relative bright spot.
Though the IMF has trimmed its forecasts for the country, it expects the People’s Republic will grow by 4.4% in 2023.
According to Reuters, using last year’s nominal country GDP figures as a base, and applying the IMF’s forecast 2022 and 2023 inflation-adjusted growth estimates for each, China will account for 30% of aggregate global growth next year.
The world economy is expected to expand by 2.7% in 2023, according to IMF most recent data.
China’s contribution to global growth is estimated to be more than three times greater than the United States.
Though US remains the world’s largest economy, the IMF expects it to grow by just 1%, while the Euro area will expand at just half that rate.
In its turn, India is forecasted to account for just 7.7% of the global growth next year, even if the country expands by 6.1%, as planned. The South Asian nation produces only about 3% of the global GDP.
All this means the world is facing a difficult 2023 as growth slows in most developed economies.
The extent of the slowdown depends to a large extent on how decisively President Xi Jinping props up the Chinese economy following next week’s key Party Congress.
After the political meeting that is likely to secure him a historic third term at China’s leadership is out of the way, he may be able to return his focus to economic expansion.
Even if China does decide to revive growth, it’s not clear yet that it will succeed.
But the fate of exporters from Australia to South Korea and multinational consumer groups will depend to a large extent on decisions made in Beijing.