WASHINGTON —

China's top leadership is shifting policy focus back to economic growth as the country eases its COVID-19 eradication policy and shifts toward reopening. This is expected to be the focus of discussions at the annual Central Economic Work Conference this week. Economic experts said that the current uncertainty of China's economic growth prospects is high, and the pace of economic recovery will mainly depend on the speed and smoothness of opening up.


The 2022 CPC Central Economic Work Conference will be held this Thursday. That's when the new economic leadership will gather to discuss economic priorities and gross domestic product (GDP) growth targets for next year.

Markets are closely watching the economic meeting in hopes that officials will lay out plans for more fiscal and monetary support. China is facing unprecedented economic challenges. The zero-coronavirus policy of the past three years has severely hit consumption, investment, and market operations. The economy is facing a double impact of insufficient domestic demand and weakening external demand.

Economists at Goldman Sachs Group recently pointed out that China still has some way to go before it can completely get rid of the new crown zero policy, and China's economic growth may remain weak in the next six months.

"The road to reopening for the world's most populous country and second-largest economy after nearly three years of zero-coronavirus policies may not be easy," Goldman Sachs Group China economist Shan Hui wrote in a note. "The combination of rising cases, easing of policies in some regions, the winter flu season, and the upcoming Lunar New Year - when hundreds of millions of people typically travel - make it difficult to forecast cases, COVID-19 restrictions, and mobility in the months ahead. How Sexuality May Evolve."

Focus shifts to economic growth


China's official policy direction is shifting toward economic growth. According to China's state-run Xinhua News Agency, the Politburo meeting held last week proposed to better coordinate epidemic prevention and control and economic and social development next year, promote overall economic improvement, and vigorously boost market confidence.

Earlier this month, China further relaxed the new crown epidemic prevention measures. The "New Ten Measures" issued by the government did not mention insisting on clearing the new crown. The restrictions on the movement of people across regions have been relaxed. Although many people believe that China's liberalization of epidemic control is the result of the "white paper movement", others believe that the pressure from the economy may be a deeper and more critical factor.

Based on signals from the Politburo meeting, the Chinese government's focus is shifting from epidemic prevention and control to economic growth, said Gerard DiPippo, a senior fellow in the economics program at the Center for Strategic and International Studies (CSIS), a Washington think tank.

Di Pipo told VOA: "I think the (central economic work) meeting focuses on economic stability and recovery, especially in the context of the new crown epidemic. The work meeting is usually based on the Politburo meeting held in December. The Politburo meeting has been held and an approximate agenda has been provided."

Niels Graham, deputy director of the Center for Geoeconomics at the Atlantic Council, a think tank, also told VOA: "The Central Economic Work Conference may emphasize additional support for economic growth and no longer emphasize China's new crown eradication. goals, while strengthening adherence to the CCP’s new ‘scientific and precise’ COVID-19 control, namely, the 10 measures announced last week.”

China's economy slowed further in November as the coronavirus outbreak spread across the country. Official data showed China's manufacturing purchasing managers' index (PMI) fell to 48 percent from 49.2 percent in October, in contraction territory below 50 percent. Indexes of business activity in the services and construction sectors also extended their decline in November.

China's economy grew just 3 percent in the first three quarters of this year, making it nearly impossible to hit the official annual growth target of 5.5 percent. Chinese officials are discussing setting an economic growth target of around 5% for 2023, Bloomberg reported last week, citing people familiar with the matter, as the government shifts to support the recovery.

Goldman Sachs expects China's economic growth rate to be 4.5% next year; JPMorgan Chase predicts that China's economic growth rate will be 4% next year. Things return to normal around the Chinese New Year at the end of the month.


In October, the International Monetary Fund (IMF) lowered China's economic growth rate to 4.6% next year. The IMF's first deputy managing director, Gita Gopinath, told a Wall Street Journal event last week that the forecast would be lowered further in January, citing China's difficult road to reopening from the new crown and vaccination rates. low productivity growth, and a shrinking workforce.

Brad Setser, a senior fellow at the Council on Foreign Relations, believes that due to the low base this year, China is likely to continue to set a growth target of around 5%, but there are still long-term challenges to economic growth.

Seiser told VOA: "Growth next year may be easier because this year's weakness creates more room for a rebound next year. But there are very significant long-term challenges that continue to weigh on the Chinese economy and hold back China's recovery. That kind of growth until 2020."

Soaring Uncertainty


Economists said that the current uncertainty of China's economic growth has increased, and the speed of recovery mainly depends on the pace of opening up and how smoothly it emerges from the epidemic.

"The speed of opening up is key, as liquidity is closely linked to consumption and economic activity in China," Alicia Garcia Herrero, a chief Asia-Pacific economist at Natixis, wrote in a note.

The bank's research estimates that in 2022, the decline in liquidity due to the new crown epidemic restrictions will reduce China's GDP growth by 2.5 percentage points.

China has seen a surge of new cases in a short period of time as the government abruptly rolled back coronavirus restrictions. Chinese health officials estimate that 80%-90% of people in China will eventually experience infection. Although most people in China have been vaccinated, the domestically produced vaccines in China use relatively backward technology and are not as effective as vaccines from developed countries.

A wave of infections could sicken large swaths of the workforce and trigger medical runs. In order to reduce the risk of infection, some residents choose to reduce their travel activities, which has a negative impact on the rapid recovery of consumption.

"Even if the new crown measures are relaxed, a large number of cases will have a negative impact on retail sales and production, because residents are likely to be Cautious about going to crowded places early on." She expects downside risks related to the new crown to persist until at least the first quarter of next year.

Economists at Capital Economics, an economic research firm, believe that Chinese officials want at least 90% of elderly Chinese to receive three shots of the new crown vaccine before fully opening up, which would take at least four months, meaning The time for China to fully withdraw from the new crown restrictions will be around the middle of next year.

Due to the weak economy and rising unemployment, Chinese residents' willingness to spend is at a low level. During the epidemic, Western countries provided assistance to families by issuing checks to support consumption, but in China, except for the issuance of consumer vouchers in some places, the Chinese government relies more on more traditional economic stimulus measures such as infrastructure and industrial subsidies.

At present, it seems that even if residents want to consume, some familiar business places have disappeared in large numbers. Restaurants, shopping malls, entertainment venues, and tourism have been strongly impacted by the epidemic in the past three years.

According to a report by the Chinese catering media Red Meal.com, as of the end of November this year, nearly 500,000 catering-related enterprises in China have been canceled. According to the report, winter is the traditional off-season for catering, and it is expected that a new round of store closures will break out at the end of the year.

The report pointed out that since the outbreak of the epidemic in 2020, "Many business owners have sold houses, cars, and borrowed money, basically relying on debts to support them, hoping that the market will improve this year. The decline and the market recovery are not as good as expected. So far, a large number of small and medium-sized enterprises have finally been overwhelmed and left in tears."

The Chinese economy has also been hit by a slowdown in the global economy that has weakened demand for Chinese exports. Official data showed that China's exports and imports contracted by 8.7% and 10.6% year-on-year in November, respectively; China's imports of integrated circuits continued to decline, indicating a cooling in demand for Chinese-made electronics.

The loosening of epidemic control will help improve the business environment for foreign companies in China, but they pointed out that the central government has not given local governments enough time to prepare, resulting in a lack of consistency in implementation across regions.

"The inconsistency in policy implementation has created a great deal of uncertainty among the general public and led to a significant drop in business confidence," the European Union Chamber of Commerce in China wrote in a statement.