China's Economic Development: the Context and Trends

The favorable conditions for China's development outweigh the unfavorable factors, and the overall trend of economic recovery and long-term growth remains unchanged.

From an international perspective, external risks and challenges have increased. The rise in geopolitical risks has added to external uncertainties and could precipitate a further tightening of international supplies of crude oil and natural gas. This could lead to further fluctuations in the prices of bulk commodities, adversely affecting the global economy and inflationary trends, and exerting further pressure on China's efforts to ensure its energy and resource security. The momentum for global economic growth is flagging, with the International Monetary Fund forecasting a growth of 3% in 2023 and 2.9% in 2024, considerably below the average annual growth rate of 3.8% in the pre-pandemic period from 2000 to 2019. Risks in global financial markets are mounting, with government debt in certain advanced economies reaching record levels. As interest rates continue to climb, benchmark rates have reached historic peaks. Some developing countries are facing further currency devaluations, sustained capital outflows, and mounting challenges in debt repayment, all of which could potentially trigger balance-of-payment crises and sovereign debt emergencies. Global industrial and supply chains are being overhauled and reorganized at a rapid pace, with a discernible trend of localization and regionalization. With regional value chain systems rapidly taking shape, there is a risk of China's position within global industrial and supply chains being diminished.

At home, our economy is affected by both cyclical and structural challenges. There is a shortfall in effective demand, and significant uncertainties surround the recovery of external demand, which is placing considerable pressure on our efforts to maintain stability in exports. Expectations for employment growth and income increases among residents are muted, which in turn is suppressing consumer spending. Investment growth is constrained, with real estate development investment exhibiting a downward trend. Pressure on investment is expected to persist. Certain industries are suffering from overcapacity, and redundant construction is evident in some sectors. Businesses are experiencing a lack of orders, elevated inventory levels, and sustained high costs, all of which are squeezing their ability to secure their survival and development. In some sectors, many hidden risks exist, and the hidden debts of local governments are posing latent risks in some regions. The possibility of financial risks in individual industries spreading across borders, markets, and sectors has significantly increased, creating the possibility of greater volatility in domestic stock, bond, foreign exchange, futures, and real estate markets. Bottlenecks are affecting the domestic economy, and further efforts are needed to promote institutional opening up. Invisible barriers to the development of a unified national market remain to be dismantled, and the orderly flow of factors of production remains constrained.

Editor：Jiang Wenyan