Contagion outbreaks, sluggish export demand remain major challenges

 

China is on track for a steady economic rebound in the following months with the optimization of COVID containment measures as well as targeted supportive measures, experts said.

 

Despite facing pressures and challenges from the COVID-19 pandemic, weakening external demand and a tepid property market, they said China's economy will likely return to a reasonable growth track next year, predicting a steady rebound in business activity as well as a gradual recovery in domestic demand.

 

Their comments came as key economic data released by the National Bureau of Statistics showed on Thursday that China witnessed steady growth in industrial production and investment in November, while consumption was weak amid pressure from COVID-19 outbreaks.

 

China's value-added industrial output grew 2.2 percent in November from a year earlier after a 5 percent rise in October, while fixed-asset investment increased 5.3 percent in the January-November period after a 5.8 percent rise in the first 10 months, the NBS said.

 

Zhou Maohua, an analyst at China Everbright Bank, expects to see a gradual rebound in both industrial production and investment in the following months, underpinned by the optimization of COVID containment measures, targeted policy easing and a gradual recovery in domestic demand.

 

Citing the negative consumption growth in November, he said that was mainly due to the disruptions to domestic business activity and weak consumption sentiment amid COVID-19 outbreaks.

 

NBS data showed China's retail sales dropped 5.9 percent year-on-year in November, after a 0.5 percent decline in October.

 

Considering that disruptions to production and business activity may continue for a certain period of time, Zhou expects to see a slow consumption recovery in the early stages followed by accelerated growth in the later stages next year.

 

"China's economy has maintained a recovery trend despite fluctuations in some months," Zhou said.

 

Looking ahead to 2023, he said China will gradually shake off the COVID impact with a recovery in business activity and domestic demand. "China's economy is expected to grow over 5 percent in 2023, and inflation is expected to remain mild and controllable next year."

 

Meanwhile, Louise Loo, senior economist at British think tank Oxford Economics, said the latest economic data actualized some of the downside risk as a result of the COVID resurgence and uncertainties, adding that "troubles in the real estate sector as well as strong external headwinds remain meaningful drags on the economy".

 

Citing a recent meeting of the Political Bureau of the Communist Party of China Central Committee, Loo said the top leadership has signaled a more pro-growth focus for next year.

 

China has recently mapped out an outline for boosting domestic consumption, expanding investment and fostering a stronger domestic market, as part of its larger drive to foster high-quality development and maintain stability of socioeconomic development.

 

The document, which was jointly released by the Communist Party of China Central Committee and the State Council and was made public on Wednesday, specified the long-range objectives for implementing the strategy of increasing domestic demand from 2022-35.

 

Zhou from China Everbright Bank said boosting domestic demand remains a necessary strategy to cope with challenges from a more complicated and grimmer global environment, which will serve as a key driver boosting steady economic growth.

 

He said it is advisable for the government to take more steps to smoothen internal economic circulation, improve the income distribution system, build a unified national market, improve the social security system, deepen supply-side structural reform and encourage the development of new consumption businesses.

 

More efforts should also be made to increase support for manufacturing, sci-tech enterprises and small businesses, speed up the construction of strategic infrastructure in fields like transportation, energy and water conservancy, and strengthen weak links in areas such as healthcare, education, eldercare and new infrastructure.

 

Charlie Zheng, chief economist at Samoyed Cloud Technology Group Holdings Ltd, said consumption and investment will serve as key drivers for China's notable rebound in 2023.