Stabilizing growth and maintaining employment continue to be the key focuses of China’s economic policies, according to a recent survey conducted by the Economic Observer. The survey revealed that the top concerns for China’s economy in 2023 include debt risk, a sharp decline in housing prices, employment pressure, and external influences. Economists predict that debt risks will weigh on the economy in 2024.
The survey also highlighted the importance of employment and private investment in the economic recovery. Economists believe that the GDP growth rate in the third quarter of 2023 will range between 4.6% to 5.4%. Additionally, 64% of economists predict that the full-year GDP growth rate in 2023 will be between 5.1% and 5.5%. The areas where investment is concentrated in the third quarter include large infrastructure, technology, energy, and consumption.
To restore confidence and momentum in the private sector, economists suggest restarting reforms and protecting private property rights. They emphasize the need to eliminate “zombie companies” that no longer create value in order to create more jobs and stimulate consumer supply.
Regarding the real estate market, economists predict a fall in housing prices in both first- and second-tier cities by 5% to 15%, and in third- and fourth-tier cities by the same range. They anticipate that new relaxation policies will be introduced to stabilize the market. To boost confidence, income growth and policy easing are seen as crucial factors.
Monetary and fiscal policies are expected to play a significant role in the second half of 2023. Economists believe that the central bank should implement a more flexible monetary policy while increasing support for key areas. The survey suggests that China may cut interest rates three times in 2023, and economists predict that the exchange rate will fluctuate between 7.7 and 7.5.
In terms of fiscal policy, there is room to increase the deficit ratio, leverage by the central government, and adjust income taxes. Reforming the fiscal and taxation systems and utilizing local government bonds, especially special bonds, are also recommended.
Overall, economists emphasize the need to stimulate market vitality, protect small and medium-sized enterprises, and focus on structural policies to promote employment and stabilize the economy. By implementing these measures, China aims to maintain stability and drive economic growth.