2023 Retaliatory Recovery Failure: China's Communist Party Pledges High-Level Opening in 2024

The Political Bureau of the Central Committee, the highest authority of the Communist Party of China, met on Friday (December 8) to discuss China’s current economic situation and economic work for next year. The meeting believed that in 2024, China should expand domestic demand, improve the resilience and security of industrial and supply chains, and maintain the bottom line of systemic risks.

2023 is the first year after China has emerged from the three-year coronavirus epidemic. The Chinese government and opposition parties hope that the Chinese economy will see a “retaliatory recovery” this year and quickly heal the huge trauma suffered by the economy and people’s livelihood during the strict clean-up and anti-epidemic period.

But this wish did not come true. Not only is there no trace of retaliatory recovery, what people see in real life and in various media is a large-scale flight of foreign capital, shrinking foreign trade, soaring unemployment, factory closures, high debt levels of governments at all levels, and a deep downturn in the real estate market.

In order to stimulate the economy, the Beijing authorities have launched various policy measures with rare intensity in the past year, even directly denying various policies and “red lines” formulated by the General Secretary of the Communist Party of China Xi Jinping in the past, and directly bailing out the deep debt crisis. large-scale real estate developers to stimulate domestic consumption, attract foreign investment, stabilize the securities market, and resume foreign trade.

However, it seems that these efforts have not been able to reverse China’s overall economic downturn. The so-called “recovery” is only reflected in various crudely modified economic figures released by the National Bureau of Statistics of China.

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The well-known international credit rating agency Moody’s recently lowered the credit rating outlook of the Chinese government, large state-owned banks, and pillar central and state-owned enterprises from “stable” to “negative”, causing a huge shock in China.

Chinese state media reported that Xi Jinping chaired Friday’s meeting. The meeting stated that next year the authorities will continue to implement “active fiscal policies and prudent monetary policies” and “deepen reforms in key areas to continue to inject strong impetus into high-quality development.”

The meeting also promised to “expand high-level opening up”, consolidate the fundamentals of foreign trade and foreign investment, and prevent and resolve risks in key areas.

Analysts mostly believe that China will be able to meet this year’s economic growth target of 5% from last year’s very low base. However, China’s development is very unbalanced and the quality of growth is not high. Facing the deterioration of domestic and international situations, 2024 will be a year with greater challenges and greater uncertainty for China’s economic development.

Some economists with Chinese official backgrounds call next year a “mediocre year” and believe that the economic growth rate will be only about half of this year, that is, less than 3%.

China’s official import and export figures released on Thursday showed that exports increased by 0.5%, higher than experts’ expectations of a 1.1% decline, and imports fell by 0.6%, which was significantly lower than the expert consensus of 3.3% growth.

Frederic Neumann, chief Asia economist at HSBC, told U.S. financial television channel CNBC on Thursday that China’s economy is unlikely to receive further fiscal stimulus even after an unexpected pickup in exports. boost, and there’s still “a steep hill to climb.”

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CNBC said that economists believe that China’s external demand is still very weak, and policy support that focuses solely on the supply side is unlikely to have long-term effects.

“There is no doubt that fiscal policy will play a leading role in 2024,” said Pang Min, chief China economist at Jones Lang Lasalle, a real estate services and management company based in Chicago.

Analysts at UBS predict that China’s fiscal deficit will remain between 3.5% and 3.8% of GDP, and that the amount of special bonds issued by local governments next year will be about 4 trillion yuan, exceeding this year’s 38,000 yuan. billion.

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