The Central Economic Work Conference 2023 was held in Beijing from 11-12 December. It outlined the economic development plan for the coming year. For China, this year has been a tough year, with continuous hostility from the western countries or medias led by the US. China admitted, during this conference, that it has been facing difficulties and challenges, including insufficient effective demands, overcapacity in some industries, weak social expectations, high potential risks, barriers to domestic economic cycle, and the rising complexity, severity and uncertainty in the external environment. It would take efforts to overcome these challenges to make economy recover and rise. However, the Asian Development Bank (ADB) has timely offered optimism to China in its recent report on the latest economic forecast released on December 13, raising China’s GDP growth rate from 4.9% to 5.2%.The significant information revealed by the Central Economic Work Conference are as follows:
To uphold and develop “socialism with Chinese characteristics,” that is Chinese-style modernization and socialist modernization. The conference pledged to advance the Chinese-style modernization as a backbone, thus focusing on high-quality and high-standard development, deepening supply-side structural reform, expanding effective demands through coordinated efforts, adhering to reform and opening and enhance endogenous power, promoting the benign interaction of high-quality development and high-level security.
To expedite technology innovation. To vigorously promote new industrialization, develop digital economy, accelerate development of artificial intelligence, build new strategic industries like commercial spaceflight and low-altitude economy, explore futuristic industries like quantum computing and life science. In addition, efforts must be made to widely apply digital technologies and green technologies to promote the construction of ecological civilization and low-carbon green consumption and thus speeding up the transformation of traditional industries. This approach aligns with the goal of economic transformation to digital economy and green economy and the promotion of green Belt and Road 2.0. China also wants to deal with the challenges from the US through technology innovation. The conference stressed the fulfillment of market access, resource acquisition, fair law enforcement and rights protection for private enterprises. It implies that the economy might recover through the investment of private enterprises so further favorable policies toward private enterprises could be expected; however, it does not suggest a possible adjustment of its “the state enterprises advance, the private sector retreat” trend. In the future, efforts will also be made to expand high-level opening to the outside world and consolidate the foundation of foreign trade and investment.
To flexibly play financial and monetary policies. China’s local government debt remains high, exceeding RMB 40 trillion according to official data. It would take a long time to solve real estate problems. So, the conference emphasized the need to coordinate the solution of risks in real estate, local government debt, and small- and medium-sized financial agencies to firmly keep the bottom line of no systematic risk. To make good use of financial policy space, appropriately expand the scope of special bonds used as capital by local government and maximize the leverage effect of special bonds. In fact, this “strengthening monitoring and preventing risks” coincides with points concluded in the Central Financial Work Conference held at the end of October. Additionally, it also emphasized social financing aggregate and the supply of money should match the expected goal of economic growth and price level to avoid a situation of overflowing. It also elaborated that if the economic growth and price level are to match the expected goal, the economic growth rate for the next year might be set at 5% and the inflation rate 3% or lower, then the growth rate of money supply could be maintained at 8%. In this way, there is still room for the People’s Bank of China to adopt monetary policy like interest rates cut and reserve requirements cut in the future.
To promote domestic demand with high consumption is also vital to maintain economic engine momentum. The conference therefore stressed the need to develop new consumption type, advocate digital, green and health-related consumption, and actively promote new consumption growth points like smart home, culture entertainment and tourism, sports events, and domestic trendy products. Also, it needs to stabilize and expand traditional consumption, raise high consumption like new energy vehicles and electric products while increasing the income of urban and rural residents and enlarge the middle-income group.
Strictly speaking, there is nothing new in the outline made by the Central Economic Work Conference this time, but it reflected the current economic reality. In summary, China’s economic growth still faces many uncertain challenges next year and it takes time to resolve structural problems. But with the sequence of “advancing in stability, stabilizing in progress, and establishing before destruction” the work of boosting the economy and preventing risks will continue moving forward. This author believes that China’s economy is expected to walk through the dark and return to stable development.
(Wo-Chiang Lee, Professor, Department of Banking and Finance, Tamkang University)
(Translated to English by Tracy Chou)
