Over the next five years, reversing a slowing economy and reviving growth will be China’s next core economic goal. On December 28, 2022, the 44th Tsinghua University Forum of China and the World Economy hosted by the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) at Tsinghua University was held online. At the webinar, ACCEPT unveiled a macroeconomic report entitled “Reviving Growth: Prospects for China’s Economic Development from 2023 to 2027.” Participants discussed a wide range of topics related to China’s economic development trends and growth paths over the coming five years from different perspectives and levels.

Enormous growth potential

In the medium and long term, China’s economy remains highly promising. According to the report, at least seven factors are responsible for the country’s economic growth potential: the accelerated optimization of the geographical distribution of human and economic resources in the future will unleash huge economic development potential; a high savings rate is the basis for coping with adjustments and growth revival; high-quality human resources lay an important foundation for the long-term growth of China’s economy; there is enormous potential for further technological innovation; China’s large market has nurtured a number of world-leading digital economy companies; China’s ability to respond to and shape the international economy has improved; and the unified domestic market will further release China’s long-term growth potential.

David Daokui Li, director of ACCEPT, suggested resolving local debts and making adjustments to the real estate industry in macro policies. At the micro policy level, private entrepreneurs should be re-energized, and scientific and technological innovators should be given sufficient incentives for achievements, Li said. It is also important to encourage local governments to actively protect local economic development, and to tilt taxation revenues towards local governments.

Internationally, it is essential to stand in solidarity and make appropriate use of China’s own favorable conditions, Li added.

The Central Economic Work Conference held at the end of 2022 rolled out a series of concrete measures aimed at improving the economic climate and market expectations. Moreover, the Conference re-proposed that practice should be used as a standard for testing the effectiveness of various policies and work, which, according to Liu Peilin, chief expert of the Research Centre for Regional Coordinated Development at Zhejiang University, has sent a very important signal.

From an economic point of view, development expectations are largely endogenous to the policy system, Liu continued. Constantly seeking truth from facts and maintaining policies’ relative continuity and stability is a crucial tool for stabilizing expectations.

Increasing domestic demand vital

Overall, China’s medium- and long-term economic development is still full of potential. Scholars proposed that the top priority should be given to designing a more optimized package to help the economy overcome short-term difficulties and achieve long-term growth. The 2022 Central Economic Work Conference clearly stated that consumption should play a fundamental role in driving economic growth.

Yao Jingyuan, former chief economist of the National Bureau of Statistics, said that China’s economy is currently in the recovery stage, and its foundation is not yet solid. As such, in 2023, it is necessary to focus on boosting domestic demand while prioritizing making the “pie” bigger and maintaining a fair growth speed. As people’s expectations become stronger, consumption will increase accordingly, Yao said.

In the field of investment, data shows that China’s investments in fixed assets (excluding rural households) continued to increase in 2021 by 8% from the previous year. Non-state-owned investment was up by 12.9%, investment in high-tech industries rose by 15.6%, and industrial technological transformation investment increased by 17.5%. However, consumption of food, home appliances, communications equipment, cultural goods, and office supplies all declined.

Yuan Gangming, a research fellow from ACCEPT, believes that galvanizing consumption should start with boosting income and increasing measures to spur consumption.

In the socio-economic cycle, less consumption and lower income will generally result in more restrictions on enterprises. As such, to fuel economic recovery, it is still necessary to ponder ways from the perspective of consumption, to actively expand consumer demand and generate a new upward cycle, Yuan advised.