China fx reserves rise $11bn to $3.128 trillion in December

Is it feasible for China to return to its previous level of sustained high development now that President Xi Jinping has been established as China’s leader for life and the country has departed the zero-COVID period? Or the era of growth is over?

China fx reserves rise $11bn to $3.128 trillion in December

Since the beginning of the pandemic, the economy that is now the second biggest in the world has been put through a lot. As a result of the repeated crackdowns on the private sector and the strict zero-COVID lockdowns, supply chains have been thrown into disarray, and investor confidence has been weakened, which has dampened early optimism about its recovery in 2020.

In January, it was reported that the country’s population had decreased for the first time in the last 60 years, which casts doubt on the country’s capacity to retain an adequate labor force. This was yet another piece of terrible news that came in January.

The war between Russia and Ukraine, as well as the COVID-19 outbreak that has been going on for three years, have placed the world “perilously close” to a worldwide recession. This has decreased the likelihood of a repeat performance of China’s lead recovery.

The national economy expanded by just 3% in 2022, according to the latest estimates. A survey of 37 economists was carried out by Nikkei in December 2022, and the results indicated that growth is anticipated to remain sluggish during the first three quarters of 2023 before ramping up strongly in the second half of the year.

A cursory glance at the past shows that when much of the rest of the world was suffering through a severe economic downturn in the 2008-2009, China was able to weather the storm and helps prop up the global economy thanks to massive government spending projects.

However, even the most optimistic projections for China’s economic rebound do not predict a return to the historically high growth rates that the nation experienced in the past.

China’s gross domestic product has grown at an annualized average of almost 10% since the government in Beijing initiated economic reforms in 1978. The national economy expanded by just 3% in 2022, according to the latest estimates.

A survey of 37 economists was carried out by Nikkei in December 2022, and the results indicated that growth is anticipated to remain sluggish during the first three quarters of 2023 before ramping up strongly in the second half of the year. The vast majority of respondents positioned their estimates for GDP growth somewhere in the range of 4.0 to 5.9 percent, with the average projection coming in at 4.7%.

However, even the most optimistic projections for China’s economic rebound do not predict a return to the historically high growth rates that the nation experienced in the past. China’s gross domestic product has grown at an annualized average of almost 10% since the government in Beijing initiated economic reforms in 1978.

Economists and academics are of the view that China’s period of double-digit growth is likely to be coming to an end. How well Beijing responds to the fundamental issues confronting China’s economy and the effect of Xi’s new goals will determine how much of a growth rate China is able to maintain in the years ahead.

It is difficult to predict with certainty whether China’s high-growth era is over permanently as there is always a hope and the opportunity. The country’s economy has undergone significant changes in recent years and is facing a number of domestic and international challenges.

Factors such as an aging population, rising labor costs, and slowing investment in fixed assets have contributed to a deceleration in economic growth. Additionally, ongoing trade tensions with the United States and other countries may also have an impact on China’s economic growth.

However, China’s government has implemented economic reforms and policies aimed at promoting sustainable long-term growth, such as the “Made in China 2025” plan which focuses on developing high-tech industries and reducing dependence on exports. It indicates that economic growth may be slow initially but will gain momentum ultimately as seen in the past.

The views expressed in this article are the author’s own and do not necessarily reflect Coverpage’s editorial stance

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