Debunking Beijing’s economic slowdown myth

It is high time that fallacies regarding the decline of the Chinese economy be addressed. While it is true that Beijing has had its share of ups and downs due to stringent COVID-19 lockdowns and the negative impact of rate hikes by the US Federal Reserve, the economy still attracts the very best in the world and that too for all the right reasons. China’s appeal with its lax bureaucratic hurdles and propensity for corporate satisfaction are areas which need to be talked about and that too with greater coverage. 2022 gives China plenty of promise, despite all the vindictive propaganda stacked against it.

With the slowing down of COVID restrictions and a propensity to push back against the negative effects of supply side shocks from the Ukraine war, Chinese economic planning has never been held hostage by global downturns. According to director of the Center for Governance and Sustainability at the National University of Singapore Business School, Lawrence Roh, global macroeconomic headwinds and the impact of the pandemic did not have an impact on China’s economic performance in 2022, which has been commendable to say the least. Similar analysts claim that the Chinese economy will continue to be an important driving force in the year 2023.

The annual Central Economic Work Conference that ended in late December 2022 is evidence of this fact. Principles were agreed upon and plans were fortified. These involved strategies such as stimulating domestic demand accelerating the construction of the modern industrial system, consolidation of the public sector – which accounts for a significant chunk of China’s GDP growth and economic potential – and supporting private businesses. Similar to statements made by the spokesperson of China’s foreign ministry, Wang Wenbin, companies from Germany, Australia and beyond will find lucrative investment potential if they persist with operations in China. In light of this, attracting more foreign investment as well as preventing major financial and economic risks are major principles that act as takeaways from the CEWC.

Much of Chinese economic policy rests on an ‘acupuncture’ or the ability to find the right point and applying the full force of state machinery to achieve that objective. Unlike the United States, which heavily relies on the health of the private sector to sustain its economic clout, the harmonisation of policy making, which is a defining characteristic of the Chinese economy, is precisely what powers it through episodes of mild turmoil and unrest. This explains why medical systems have become increasingly fortified and how through strict lockdown measures, more virulent strains of COVID-19 have weakened.

Those criticising the supposedly draconian measures that China has adopted fail to account for how the interlinkages between zero-COVID and the long-term health of the world’s largest economy. Such adjustments have an inevitable impact on business confidence and revitalises economic activities such as steel manufacturing, the automotive industries, telecommunications and tourism. Several global banks have also predicted that the Chinese economy will have a strong performance in 2023, with Morgan Stanley and Societe Generale – two major multinational financial services companies – forecasting a growth rate of five percent in 2023.

Such optimism hinges on a number of important factors which need to be considered. According to International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, China benefits from enough fiscal space to manoeuvre its economy and counter downward pressure. Secondly, the largest global corporations from different countries have invested millions of dollars into the Chinese economy and wish to stay put to reap benefits and profits, which is otherwise not possible if withdrawals take place. According to UBS strategists, Christopher Swann and Vincent Heaney, Chinese equities rose by 37 percent since the start of November, 2022 due to multiple positive openings from Beijing.

Then come figures regarding multinational investments which point towards greater optimism for the future. In the first 10 months of 2022, the FDI in the mainland has increased to 17.4 percent year-on-year to $168.34 billion. This includes investments from German heavyweight Volkswagen, which announced investments up to $three billion in two research and development focused joint ventures in China. Confidence in the Chinese market is sky high and forms the bedrock for the spike in investments as seen in 2022.

Additionally, investments in the Regional Comprehensive Economic Partnership (RCEP) and the Belt and Road Initiative (BRI) have continued unabated despite cosmetic downturns which were expected to shake investor confidence. China’s investments in the flagship China-Pakistan Economic Corridor have remained consistent, as have its calls to further expand the RCEP, the largest trading deal by volume in history. This emphasis of opening up to the outside world and the international community was underlined at this year’s annual Central Economic Work Conference, where China would expand market access and open up the service sector.

It is clear that the myths of China’s economy becoming irrelevant are nothing, but mere fallacies, prompted by anti-China elements who wish to see Beijing being subjugated. Trends in 2022 clearly indicate that China will remain an economic force and play a significant global role.

The writer is an Assistant Research Associate at IPRI