China's Economic Recovery: Policy Support and Structural Reforms Key for Sustained Growth

PRESS RELEASE DECEMBER 14, 2023

Sustned Policy Support and Structural Refor Revive China’s Growth Momentum - World Bank Report

BEIJING, December 14, 2023 - The Chinese economy has experienced a gradual recovery in 2023, marked by an upturn in service demand, robust manufacturing investments, and public infrastructure stimulus. However, the economic performance remns unstable, characterized by deflationary pressures and lingering consumer hesitancy. This highlights the need for steady policy intervention alongside deeper structural refor sustn growth momentum, as outlined in Which Way Forward? Navigating China's Post-Pandemic Growth Path, the latest China Economic Update released today by the World Bank.

The projected growth rate for 2023 is estimated at 5.2, with a slowdown anticipated to 4.5 in 2024. These projections are influenced by several factors: continued weakness in the real estate sector, persistently tepid global demand in the short term, and structural constrnts that limit growth potential, including high debt levels, population aging, and slower productivity gns compared to previous periods.

“Macroeconomic policy easing has provided a boost for the recovery during this period,” sd Mara Warwick, Country Director for China, Mongolia, and Korea at the World Bank. “To ensure sustned growth momentum in the long-term, it is crucial that structural reforms are complemented with policies med at boosting confidence and stimulating economic activity.”

The report underscores several risks facing China’s economy. The ongoing downturn of the property sector may exceed initial expectations, impacting consumer sentiment and sping patterns. This could have a cascading effect on supply chns, creditors, and local government revenues, potentially leading to reduced public investment levels. Furthermore, global demand softness and increased geoeconomic tensions are seen as potential threats, alongside climate change-induced vulnerabilities such as more frequent extreme weather events.

The China Economic Update also delves into the evolving structural dynamics and medium-term challenges facing the Chinese economy:

1. Investment Reallocation: There has been a notable shift in investment from real estate to manufacturing sectors where higher returns are realized. A conducive market environment and predictable regulatory framework are essential for guiding capital flows to the most productive firms and industries.

2. Sustnable Growth Path: To ensure greener, more sustnable economic growth moving forward, consumption must be encouraged through policies that enhance social safety nets, facilitate hukou system liberalization, and promote inclusive finance practices.

Key Takeaways from the China Economic Update:

• Macroeconomic policy support has been instrumental in sustning recovery efforts.

• Complementary structural reforms are necessary to boost confidence and growth momentum.

• Risks include exted real estate sector downturn impacting consumer sentiment, potential pressure on local government revenue, vulnerabilities related to global demand and geoeconomic tensions, and climate change risks.

This insight-packed report offers a comprehensive view of the current economic landscape in China, highlighting both opportunities and challenges for policymakers as they navigate the path towards robust post-pandemic growth.

For further information or interviews with World Bank experts on this subject, please contact:

• Beijing Office Contact: Tianshu Chen

Eml: [email protected]

Links to Download Report: China Economic Update - December 2023https:www.worldbank.orgentopicdevelopmentmacroeconomicsbriefchina-economic-update-december-2023

Visit the World Bank's China Page: World Bank in Chinahttps:www.worldbank.orgencountrychinaoverview

This article is reproduced from: https://www.worldbank.org/en/news/press-release/2023/12/14/sustained-policy-support-and-deeper-structural-reforms-to-revive-china-s-growth-momentum-world-bank-report

Please indicate when reprinting from: https://www.i466.com/Financial_Corporation/China_Growth_Recovery_Update_World_Bank.html