China Expected to Play Major Role in Global Economic Growth in 2023
China is expected to contribute to around 40 percent of global economic growth in 2023, reaching a 6.5 percent GDP growth rate, according to Morgan Stanley's chief China economist, Robin Xing. This is an increase from the 5.5 percent forecasted at the end of November. The Chinese government has set a 2023 GDP growth target of above 5 percent, with monetary and fiscal easing to support the rebound.
The International Monetary Fund recently released an update to its World Economic Outlook Report, raising China's economic growth forecast for this year to 5.2 percent. The United Nations released its World Economic Situation and Prospects 2023 report, predicting that China's economic growth will reach 4.8 percent this year.
A report by the Goldman Sachs Group suggests that China's deepened opening up of its economy and recovery in domestic demand could boost global economic growth by around one percent in 2023. The report added that each 1 percent increase in China's GDP is estimated to raise broader global growth by 0.2 percent.
At China's annual Central Economic Works Conference in December, Chinese President Xi Jinping told his officials to focus on expanding domestic demand, and policies have been geared towards this. China's domestic demand in 2023 is likely to increase by up to 5 percent, and the return in goods demand could provide a moderate boost of around 0.4 percent to GDP in most Asia-Pacific economies.
The report also said China's recovery will likely boost commodities demand and prices, which will benefit oil exporters such as Canada. Higher oil demand will benefit oil exporters, though higher oil prices will likely weigh on the real income and growth of other economies.
The international community has been convinced by China's success in maintaining low prices that it has the capacity to carry on with a proactive fiscal policy and prudent monetary policy. In December 2022, the year-on-year consumer price index growth in the United States was 6.5 percent, in the eurozone it was 9.2 percent, and in the United Kingdom it was 10.5 percent. In contrast, China's price level is generally stable, with the annual consumer price index rising by 2 percent in 2022, allowing it to provide more support to the economy in the adjustment phase.
Overall, China's adjustment of its COVID-19 pandemic response will not only speed up its own economic recovery, but also boost global economic growth.
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