When Li Qiang, the new Prime Minister of China, warns in his first press conference after assuming the duties of his new position, that it will not be easy for his country – the second largest economic power in the world – to achieve the growth goal of about 5 percent, as this will require a lot of effort. Effort.
And when the Chinese authorities reveal that the growth rate achieved in 2022 amounted to only 3 percent, with a large difference from the primary target set at 5.5 percent, there is no doubt that sirens sound, warning not only in China but also in the entire global economy that the Chinese dragon is suffering from economic difficulties. .
But what is the nature of the challenges facing the Chinese economy, how long can it last, and what measures and procedures will it take to restore its ability to achieve its economic goals? That the matter does not go beyond a state of turmoil in the global economy, of which China pays a share commensurate with its economic weight? There are many questions raised by the Chinese prime minister’s recent statements, and there are also many answers and points of view on how the Chinese economy will perform in the coming years.
Al-Eqtisadiah polled the views of a group of economic experts in an effort to identify the dimensions of the Chinese economic scene in its various details, to monitor the directions it could take, and to highlight the nature of the solutions that the Chinese leadership could resort to to re-accelerate the pace of economic growth again.
For his part, Professor K. Mother . Tobin, a former professor of economics at Shanghai University and an expert in the Chinese economy, is optimistic about the course of the Chinese economy in the medium and long term, but warns of economic challenges in the short term, especially when it comes to the proposed treatment methods.
And he monitors for Al-Eqtisadiah the factors that led to this unusual tone in the statements of the Chinese Prime Minister, saying, “The health conditions in China are a result of the Corona pandemic, especially with the government’s excessive adoption of strict policies known as zero Covid to confront the disease, and the long-term and repeated closures have been reflected.” On economic production, especially industrial, and of course affected the service sector, in addition to that problem, the shock that hit the Chinese real estate sector, which represents more than a quarter of the total gross domestic product, this sector has been suffering since 2020 as a result of strict government measures in the field of lending to real estate companies due to excessive construction in many of Chinese cities.
He adds, “However, these problems are somewhat temporary and require adjustments in investment trends, and China’s abandonment of the zero Covid policy last December will begin to have positive effects, especially in the field of consumer spending, pushing the services sector forward, and a decline in logistical bottlenecks, and this will contribute to in the growth of the Chinese economy.
Nevertheless, some experts believe that the Chinese leadership must now go beyond the rules that it has adopted for years and contributed to achieving its “economic miracles”, as promoting exports and stimulating government investment without addressing the problems of lack of consumption and slowing income growth may hinder economic recovery.
From this standpoint, Edward Stanley, an investment expert, believes that Chinese exports broke a record last year of $3.59 trillion and grew at a rate of 7 percent, yet China failed to achieve the target growth rate of 5.5 percent.
He told Al-Eqtisadiah, “The Chinese economy maintained an annual growth rate of gross domestic product that reached 9 percent for nearly two decades between 2000 and 2019, and the consumption of Chinese households was an important engine driving growth rates, as it achieved nearly 40 percent. Of the gross domestic product, the middle class was growing and with it the desire for more consumption, driven by its confidence that the coming days are better economically.
He adds, “Some studies indicated that about 3.5 percent of Chinese families had an annual income of $3,800 in 1997, and this figure rose by more than 12 percent in just five years, opening up a consumer appetite. That appetite began to decline in 2017, then it declined sharply as a result.” The Corona epidemic, and this exacerbated problems such as unemployment, which now stands at about 5.6 percent in a country that annually has to provide about 12 million new jobs.
Edward Stanley, an investment expert, believes that what the Chinese Prime Minister describes as “encirclement” and “oppression” practiced by the United States against his country, the growing Western efforts to reduce trade and investment relations with China, and the growing hostile competition between the two parties, especially in strategic economic fields such as semi-transportation, The Chinese economy will push to change the economic compass towards more focus on domestic consumption, indicating that the consumer market in China is worth six trillion dollars, and it will be pivotal to put the world’s second economy back on track, especially since global demand for China’s products is still slow.
This point of view seems more acceptable among many experts, but the wave of consumer spending in China is still suppressed and the domestic policy to support it has not yet been formed, and the government does not seem ready to make huge investments in infrastructure and of course the real estate market, however, things seem encouraging, as Economic activity strengthened in the first two months of this year with the recovery of investment. Investment in fixed assets increased by 5.5 percent over the past two months, and retail sales increased by 3.5 percent compared to the same period last year, which is an indication of the recovery in consumer spending.
Some experts believe that if the Chinese economy is stagnant at a low level of growth and its performance is significantly below its potential, especially since middle-income and poor families have depleted their savings during periods of closure due to the Corona pandemic and the zero Covid policy, then China needs to develop an economic strategy. New.
In turn, Albert Black, a researcher in the field of international economics, told The Economist, “The Chinese middle class will need to spend on more than cinema tickets and food in order for the economy to recover. They will need to make large and huge purchases such as cars, electrical appliances and homes, and this is an important aspect, but What must be addressed is that the Corona pandemic was not the root cause of the economic problems that China is currently facing, but rather contributed to the complexity of the problem. The Chinese economy was facing challenges before the outbreak of the Corona epidemic, because it was seeking to move to a high-tech economy.
He adds, “Chinese economic policy must move on a number of axes simultaneously to raise the growth rate. It must reform the real estate sector and move it away from the brink of the crisis it is currently struggling with. It must restore the confidence of the middle class in the future to motivate it to spend heavily, and not be satisfied with granting companies Small tax exemptions, but rather direct financial stimulus for them, with more attention to local governments, which are usually considered an engine of economic growth, and accelerating the transition to a high-tech economy.
Dr. Ashley Lee, Professor of International Trade at the London School of Economics, agrees with the above point of view, and believes that the policy of growth through export abroad is approaching its extreme limits in China, and will not add much to the Chinese economy in the future.
She told Al-Eqtisadiah, “The prosperity of Chinese exports will not reflect much on ordinary families, and China cannot currently stimulate its economy through economic export mechanisms only. Of course, promoting exports is important, but its impact has become marginal and limited to growth.”
Dr. Ashley points out that China became the largest exporter in the world in 2009, and in 2020 its share of global commodity exports reached about 15 percent, which is more than the share of the United States of America and Japan together, but it is noted that it reached its maximum in 2016, when it represented 36 percent this year. percent of GDP, but it has been declining since then, and government stimulus packages have increased government indebtedness.
And she adds, “Therefore, the Chinese leadership seems more convinced now than ever before to give priority to private consumption to achieve economic recovery, which requires it to restore the confidence of the Chinese consumer, especially from the middle class, and it must address its citizens on the basis that the economic challenges facing the country are huge, While China has the economic and technical capabilities that qualify it to overcome it.