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Prof. Lu Feng: Time and Consumption Tide Needed for Economic Recovery

Dec 16-2022   



China’s economic recovery will have to navigate a range of uncertainties, so the growth rate should not be set too high, said Prof. Lu Feng of the NSD in a media interview. He believed that 5% GDP growth makes for a positive target for 2023.

 

His comments were solicited following a recent proposal by six economists, including Prof. Yao Yang, Dean of the NSD and BiMBA Business School, laying out seven suggestions for normalizing economic activities.

 

Most estimates put the growth potential of the Chinese economy at around 6% annually, said Prof. Lu, adding that a 5% target for 2023 is significantly superior to the 3.2-3.3% growth expected of 2022 and will more effectively catalyze economic recovery on policy level. It also makes sense given that positive conditions for recovery are counterbalanced by uncertainties related to the transition of pandemic controls and the evolution of external environments.

 

As the economy gradually gets back into shape, consumption can be expected to shake off the gloom, though it won’t be a smooth sail, especially in the first quarter of 2023 when consumers might refrain from leaving their homes for fear of infections. Performance will also diverge among industries; for example, the private tuition sector underwent policy-required shakeup in 2021 and will hardly be able to win as many clients back as in its heyday.

 

Spurring consumption is needed also because export growth has tumbled into negative territories in October and November, in stark contrast to its boom during much of the pandemic period. However, it will take time and efforts to infuse consumers with confidence, as their concerns with decreasing current and future incomes, as well as slumping asset prices, have led them to increase savings and compress household balance sheets.

 

During the pandemic, China’s production capacity has expanded as a result of strong overseas demand. Given the manufacturing overcapacity and the gradual awakening of consumption, China is likely to maintain a low inflation environment in 2023, said Prof. Lu.

 

Prof. Lu Feng: Time and Consumption Tide Needed for Economic Recovery

Dec 16-2022   



China’s economic recovery will have to navigate a range of uncertainties, so the growth rate should not be set too high, said Prof. Lu Feng of the NSD in a media interview. He believed that 5% GDP growth makes for a positive target for 2023.

 

His comments were solicited following a recent proposal by six economists, including Prof. Yao Yang, Dean of the NSD and BiMBA Business School, laying out seven suggestions for normalizing economic activities.

 

Most estimates put the growth potential of the Chinese economy at around 6% annually, said Prof. Lu, adding that a 5% target for 2023 is significantly superior to the 3.2-3.3% growth expected of 2022 and will more effectively catalyze economic recovery on policy level. It also makes sense given that positive conditions for recovery are counterbalanced by uncertainties related to the transition of pandemic controls and the evolution of external environments.

 

As the economy gradually gets back into shape, consumption can be expected to shake off the gloom, though it won’t be a smooth sail, especially in the first quarter of 2023 when consumers might refrain from leaving their homes for fear of infections. Performance will also diverge among industries; for example, the private tuition sector underwent policy-required shakeup in 2021 and will hardly be able to win as many clients back as in its heyday.

 

Spurring consumption is needed also because export growth has tumbled into negative territories in October and November, in stark contrast to its boom during much of the pandemic period. However, it will take time and efforts to infuse consumers with confidence, as their concerns with decreasing current and future incomes, as well as slumping asset prices, have led them to increase savings and compress household balance sheets.

 

During the pandemic, China’s production capacity has expanded as a result of strong overseas demand. Given the manufacturing overcapacity and the gradual awakening of consumption, China is likely to maintain a low inflation environment in 2023, said Prof. Lu.