The year 2022 has seen the world economy limping on through the shockwaves of a barrage of unknowns. And the year 2023 could be off to a fairly rough start due to the continued impact of such undesired events like the Ukraine crisis, the U.S. Federal Reserve rate hikes, a worldwide inflation, the energy and food crises, as well as the lingering pandemic.
Against the backdrop of such a volatile international landscape, China has maintained sound fundamentals and pursued high-quality development. The resilience and potential of its economy have inspired hope among the international community.
“WORLD WITH MORE FRAGILITY”
Ordinary people around the world have already been leading a difficult life in 2022: renting a house is too expensive, the energy bill is too high to afford, going to the supermarket often means snapping up vegetables in sales.
“We may be entering a new era of Great Stagflationary Instability,” Nouriel Roubini, a professor emeritus of economics and international business at New York University’s Stern School of Business, wrote in a Time magazine article in mid-October.
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Devastating inflation has been felt in both developed and developing countries. The annual inflation rate of the United States reached 9.1 percent in June, the highest in almost 41 years, and it remained as high as 7.1 percent in November. Eurozone’s inflation has been in double digits for three consecutive months. Core consumer prices in Japan jumped 3.7 percent in November, the biggest since December 1981. Türkiye’s annual inflation rate accelerated to 85.51 percent in October, its highest level since 1997. Inflation in Argentina is expected to hit almost 100 percent by the end of the year.
The United States and its allies imposed rounds of sanctions on Russia in hopes of choking the country’s energy export channels and destroying its economy. However, those sanctions have backfired and hurt U.S. allies, and have triggered a worldwide energy crisis.
“The global economy is reeling from the largest energy crisis since the 1970s. The energy shock has pushed up inflation to levels not seen for many decades and is lowering economic growth all around the world,” Alvaro Santos Pereira, chief economist ad interim of the Organization for Economic Cooperation and Development (OECD), wrote in late November.
Adding to those troubles is a United States continuously introducing destructive policies that weigh on the world economy by driving up global prices, disturbing financial markets and undermining the global economic and trade order.
To bring down inflation, the Fed has raised interest rates seven times this year with a total increase of 425 basis points, and signaled that it will continue to raise rates in early 2023, and will not begin to cut them until 2024. The rest of the world has felt the pain.
The International Monetary Fund (IMF) forecasted that global economic growth will slow from 6.0 percent in 2021 to 3.2 percent this year. Many developing countries have seen their currencies weaken against the dollar, while some low-income countries are already at high risk of or in debt distress.
The global economy is “dangerously close” to a recession, as inflation remains elevated, interest rates rise, and a growing debt burden hits the developing world, World Bank President David Malpass said in October.
“We are experiencing a fundamental shift in the world economy from one of relative predictability … to a world with more fragility,” IMF Managing Director Kristalina Georgieva said in early October.
A POINT OF DIVERGENCE
The IMF already lowered its global growth outlook for 2023 to 2.7 percent in October. However, Georgieva reiterated in mid-December that the likelihood of further downgrades in its projections will be “high,” calling 2023 a “very difficult year.”
Meanwhile, many observers believed that 2023 could be a point of divergence, with developed countries possibly sliding into a recession and emerging economies starting to recover.
An economic outlook note on the United States by OECD said real GDP is projected to grow by 0.5 percent in 2023. More pessimistically, a recession probability model by Bloomberg economists forecasted a 100-percent chance of a recession in the country by October 2023.
The market has expected the Fed to cling to its aggressive monetary policy. Economists surveyed by Bloomberg see median estimate of the policy benchmark peaking at 4.9 percent in 2023, as the central bank will likely introduce two more rate hikes of 25 basis points next year.
“Inflation is eroding everything,” said Jamie Dimon, chairman and chief executive officer of JP Morgan, in early December. “When you’re looking out forward, those things may very well derail the economy and cause a mild or hard recession that people worry about.”
Things could be worse for Europe. The European Central Bank has raised interest rates four times since July with a total increase of 250 basis points. In the meantime, the EU’s sanctions have largely reduced Russia’s energy exports to Europe, pushing energy prices higher and further exacerbating Europe’s pain.
For 2023 as a whole, the European Commission’s autumn forecast projected real GDP growth in both the EU and euro area at 0.3 percent — well below the 1.5 percent and 1.4 percent expected in the previous July forecast.
“The surge in energy prices and rampant inflation are now taking over and we are facing a very difficult period both from a social and economic point of view,” European Commissioner for Economy Paolo Gentiloni warned in November.
He said the outlook for next year has “weakened significantly,” and most EU countries will be in recession in the fourth quarter of this year.
The path forward for emerging economies is a bit sunnier. While the United States and European economies falter, the emerging markets of Asia will altogether account for three-quarters of world growth next year, the OECD said.
“While external demand will remain soft through the first half of 2023, Asia’s domestic demand is supported by reopening and the easing of financial conditions,” two Asia economists of Morgan Stanley wrote in November on Singapore-based The Business Times. “In 2023, Asia’s growth will be able to outperform on the back of robust domestic demand.”
East Asia will sustain strong economic growth in 2023, said Kiatipong Ariyapruchya, senior country economist of the World Bank for Thailand, adding that China’s economic recovery will serve as a “tailwind” for global economic revival.
CUTTING THROUGH DARKNESS
In the face of multiplying crises in 2022, China has maintained the overall stability of its economy by effectively coordinating COVID-19 policy with economic and social development, and introducing a series of stimulus packages to support enterprises, stabilize consumer prices, and boost the confidence of global investors.
Looking ahead, China has not only prioritized economic stability, aiming to pursue steady progress while ensuring economic stability, but also pledged to further expand domestic demand and give full play to the fundamental role of consumption and the key role of investment in 2023.
Considering the fact that Beijing has a diverse toolbox at its disposal to secure a resilient recovery, observers predict the Chinese economy will have a sound performance next year, which will inject strong momentum into world recovery.
The Chinese market continues to show its appeal. Data from China’s Ministry of Commerce said foreign direct investment (FDI) into the Chinese mainland, in actual use, expanded 9.9 percent year-on-year to nearly 1.16 trillion yuan in the first 11 months of the year. In U.S. dollar terms, the inflow went up 12.2 percent year-on-year to 178.08 billion dollars. The FDI inflow of high-tech industries jumped by 31.1 percent from a year earlier.
Fukaishi Akihiro, president of Epson (China) Co., Ltd., said that under the pandemic, the company still sees steady business growth and development in China.
China’s economic potential has also grown. In the Global Innovation Index 2022 released by the World Intellectual Property Organization, China has risen to the 11th rank among the 132 economies surveyed. It marks the country’s 10th consecutive ascent.
“All fundamentals are in place” in China for continued economic growth over the next 20 years, BHP Group CEO Mike Henry said in late November, adding that “obviously, China is going to provide a bit of stability to global growth over the next year.”
As has been witnessed, China’s development has shown a strong positive spillover effect worldwide. A total of 73.52 billion dollars worth of tentative deals were reached for one-year purchases of goods and services at the fifth edition of the China International Import Expo, up 3.9 percent year-on-year. The China-proposed Global Development Initiative has won the support of more than 100 countries and international organizations, and China has signed Belt and Road cooperation documents with 150 countries and 32 international organizations. It has been proven that with concrete actions to open its door wider to the rest of the world, China is making the pie of global common development even bigger.
China is carrying out win-win cooperation and establishing mutually beneficial economic and trade relations with countries around the world, which is of great significance to the world economy, said Argentine economist Jorge Marchini.
There are so many countries willing to work with China because it has helped them tremendously in development, said Helga Zepp-LaRouche, founder and chairwoman of German think tank the Schiller Institute. “That’s the secret of the Belt and Road Initiative and why many countries want to cooperate with China.”
Originally published by Xinhua