China continues to drive global economic growth

BEIJING – China’s economy has shown remarkable resilience and enormous potential, as evidenced by key indicators that have surpassed expectations and signs of consumer and investor confidence. This has become a significant driving force for the struggling global economy, according to market experts.

China has set a GDP target of around 5 percent for 2023, according to a government work report deliberated and discussed by national legislators and political advisors who have gathered in Beijing for their annual meetings, also known as the “two sessions.”

The rapid recovery of China’s economy has been under the spotlight since the end of last year. International institutions and investment banks not only raised their projections for China’s growth in 2023, but they have also highlighted the country’s role as the main engine for global economic growth.

The International Monetary Fund (IMF) has raised its projection for China’s economic growth in 2023 to 5.2 percent. Morgan Stanley, Goldman Sachs and other investment banks have also revised their forecasts upwards.

China will continue to be one of the major countries to see the strongest growth this year, and its contribution to global economic growth will stand at 30 percent, said Steven Barnett, IMF senior resident representative in China.

Recent indicators of the country’s factory activity and inflation have shown a steep upward trajectory, resulting in raised projections.

The purchasing managers’ index for China’s manufacturing sector came in at 52.6 in February. This figure, which serves as a forward-looking indicator of sentiment, is now at its highest level since April 2012.

According to Julian Evans-Pritchard, head of China economics at Capital Economics, China’s latest “exceptionally strong” data confirmed a “very rapid rebound” in economic activity. Given the quick turnaround, the expert believes his firm’s 5.5 percent growth forecast for China this year may be too conservative.

The country’s consumer price index (CPI) remained tame coming into 2023, with the February reading standing at 1 percent. China has targeted an inflation rate of around 3 percent this year, according to the government work report.

The CPI grew by 2 percent last year, which is in sharp contrast to the high level of inflation globally and confirms China’s role as a stabilizer for the world economy in the face of downward pressures and uncertainties.

Tourism revenues in China surged 30 percent year on year and cinemas nationwide reported the second-highest box office figure on record during the week-long Spring Festival holiday in January, indicating improving consumer sentiment.

Meanwhile, China is fully aware of external challenges stemming from lingering high inflation and weakening economic and trade growth globally that could have an impact on its own growth.

To brave the challenges, China will consolidate the foundation for stable growth. A spate of pro-growth policies was announced in the government work report, including a priority to the recovery and expansion of consumption, 3.8 trillion yuan ($545 billion) of special-purpose local government bonds, and continued tax and fee cuts to relieve the burdens for businesses.

International investors have shown much enthusiasm in expanding their presence in China to seize the opportunities the world’s second-largest economy has to offer, demonstrating their confidence in the country’s growth.

Market data shows that net overseas capital inflow into shares traded at the Shenzhen and Shanghai bourses hit a single-month record of 141.29 billion yuan in January, more than the whole of 2022.

The MSCI China Index, which tracks Chinese companies listed in the United States, Hong Kong and the Chinese mainland, rose nearly 12 percent in January alone and is projected to reach 80 by the end of this year.

Sweden’s Electrolux Group will continue to expand its investment in China, as the country’s fast-growing middle-class consumers are looking for high-quality products to improve the living standard, according to Ramon Sariego-Villar, managing director of Electrolux China.

The leading global appliance company has established manufacturing plants across the country and a research and development center in Shanghai over the years.

According to a recent survey conducted by the American Chamber of Commerce in South China (AmCham South China), over 90 percent of the participating companies consider China to be one of their most important investment destinations, while 75 percent of the surveyed companies said they plan to reinvest in China in 2023.

“The potential growth of the Chinese market, preferential policies and industrial cluster effect are the crucial factors to stimulate companies to increase their investment in China or shift investment from other markets to China,” said AmCham South China President Harley Seyedin.

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