A difficult 2022 has given way to an uncertain 2023. We would like to take a moment to pay our respects to everyone fighting the Covid-19 pandemic and extend our best wishes to everyone who survived the virus. For this new year, hopes and challenges are intertwined as always, but more strongly than in previous years. The three-year pandemic has changed the world.
The past year brought stunning changes, both to China and the rest of the world. The about-face in China’s Covid control policy at the end of last year was most notable. This change was a response to the people’s wishes and the global trend, surprising a great number of people with its speed and magnitude. Short-term shocks are emerging, while the long-term impacts remain to be seen.
The rest of the world suffered its own turmoil. At the beginning of 2022, the Russia-Ukraine conflict broke out, while the Beijing Winter Olympics remained exciting. As this geopolitical crisis went on, the international commodity market was thrown into disarray, which along with high inflation in Europe and North America, led to a sluggish recovery of the global economy. The omicron variant is clearly less virulent but more propagating. The pandemic has yet to be completely tamed.
The world has changed in roughly three areas. First, the world’s economic landscape has changed, especially the stepped-up adjustment of the global supply chain, industrial chain and value chain. All economies are experiencing ups and downs. The U.S.-China technology decoupling has increased, aggravating China’s bottleneck problems. Second, the Russia-Ukraine conflict sparked an international geopolitical crisis, forcing many countries to take sides, thus forming a clear opposing front. Third, the three-year pandemic has helped people get a clearer picture of the governance of different countries and regions and has disclosed their mentality, which has changed significantly. There are many other changes that are evolving. There is no need to speak for history or draw hasty conclusions.
When it comes to China’s economic growth in 2023, phrases like “back to a reasonable range” and “back on a normal track” have been heard frequently. If it is directed at the management system or policy tone, such calls are rational. But radical changes have taken place in China and the world over the past three years, so we cannot simply “go back.” Based on this, some scholars warn of Covid-led “institutional damage” to the Chinese economy, while some others advise not to overestimate the strength of retaliatory consumption and a recovery of the real estate market. At the recent Central Economic Work Conference, it was mentioned that China has a weak foundation for economic recovery and is facing a triple whammy: tremendous pressures from demand contraction, shocks on demand and supply and waning expectations, as well as a turbulent external environment, leaving its economy deeply affected. These warning signals deserve our close attention. The more sober we are, the less passive we will be.
China’s economy remains resilient, with great potential and vitality. After China finishes adjusting its pandemic control policy, its strong ability in intrinsic economic growth will show. This is the fundamental basis for our confidence in China’s economic growth in 2023. China’s macroeconomic policies will be further optimized. But as the world economy is facing the risk of recession, China is unlikely to be immune. The International Monetary Fund forecast that global growth will slow from 3.2% in 2022 to 2.7% in 2023. This is bound to weigh on China’s exports. Hence, both internal and external factors — both favorable and unfavorable — must be considered when planning Chinese economic growth in the new year.
In the face of the changed world, China’s top priority is to “manage its own affairs well” in addition to optimizing pandemic control measures. The 20th National Congress of the Communist Party of China’s report reiterated that development is the first priority for the party to govern and rejuvenate the country, and called for continuous reform efforts to develop the socialist market economy and open up wider to the outside world. Classified reform of state-owned enterprises needs to be deepened, and favorable policies for the private sector released at the Central Economic Work Conference should be urgently implemented. We have substantial room for the improvement on fundamental systems of the market economy, such as the protection of property rights, market access, fair competition and social credit. The core issue in economic reform is the relationship between the government and the market. We should admit the relationship over the past three years has been messed up. It calls out for a more rational approach. What happened over this period gives us a clearer understanding about how to improve the local governance system. In terms of opening up, the imperative for the country is to steadily expand institutional opening-up regarding rules, regulations, governance and standards, as well as to protect foreign investors’ rights and interests in accordance with the law and create a market-oriented, law-based and internationalized business environment. The Central Economic Work Conference proposed advancing China’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Digital Economy Partnership Agreement (DEPA) and other high-standard economic and trade agreements. Efforts in this regard do not come easy in the current complex international environment.
In the face of the world changed by the pandemic, we need to make bountiful preparations, both materially and psychologically. The recent surge in infected cases across China exposes the weakness of its health care system, and the mounting number of severe cases and deaths come as a psychological shock. Many outbreaks are projected in the future. We should find the means to save the situation. The three-year pandemic control teaches us that advancing reform of the medical and health industries and developing a tiered diagnosis and treatment system are pretty much the correct agenda for the country.
When it comes to the changes in China and the rest of the world, the pandemic is the first thing that comes to mind. To be sure, we are witnesses to how seriously the pandemic has impacted economic and social development. But just like all pandemics in human history, Covid-19 catalyzes the unfolding of already existing contradictions and conflicts in the economy and society. The strategies of all countries to cope with Covid have vividly demonstrated the strengths and weaknesses of their respective institutional arrangements, and their success or failure fundamentally lies in their governance systems and governance capabilities. Under the current situation in which hundreds of millions of Chinese are being infected, remedies are in urgent need.
People struggling to survive these last three difficult years have experienced trauma, happiness and hope. Seeing the suffering and distress, we call for an ambitious revitalization plan. In the new year, to invigorate society and the economy, and recognized the heroic devotion and grievous sacrifice, we need to contemplate what else can we do when facing up to a changed world.
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