China central bank adviser sees GDP growth above 5% in 2023

CHINA’S economy will likely grow more than 5 per cent next year should Covid disruptions end and the government roll out more policies to boost confidence and consumption, according to an adviser to the People’s Bank of China (PBOC).

The gross domestic product (GDP) growth estimate from Wang Yiming, a member of the PBOC’s monetary policy committee, is the latest forecast from a prominent Chinese economist as the government tries to help economic activity recover from this year’s slowdown. He was speaking via video to a conference on Wednesday (Nov 23) organised by the Hong Kong Institute for Monetary and Financial Research.

“China has the conditions to achieve at least 5 per cent economic growth” in 2023, said Wang, who cited recent policies to address both Covid controls and the property downturn as favourable factors. He also said a “more proactive target” is needed to guide expectations and prioritise getting growth back on track.

Economists surveyed by Bloomberg expect China’s GDP to expand 3.3 per cent this year, which would be one of the weakest levels in decades, before rising to just under 5 per cent next year. While experts have said recent measures to help the property sector are a potential game-changer for the market, some have warned of continued risks.

Goldman Sachs Group chief china economist Hui Shan said earlier on Wednesday that the country’s Covid strategy was a “big roadblock” for the property sector. While the government is trying to ease some restrictions to reduce the impact of the Covid Zero policy, the current outbreak is rapidly growing and the nation faces a slow exit from the current policies.

Wang’s projection echoes that of others who have called for a growth target of at least 5 per cent next year to lift China out of its slowdown. However, another state-linked expert said earlier this week that a “more prudent” goal of 4.5 per cent to 5 per cent would help preserve policy space and deal with any global shocks.

Wang said the PBOC would have more room to adjust monetary policy in the first half of next year should the Federal Reserve slow the pace of its aggressive interest rate hikes.

The US central bank has boosted rates six times this year and is expected to keep doing so, though it may begin slowing down the pace from next month. The Fed’s pace of tightening this year has created capital outflow pressures for China, Wang said.

He added that the PBOC would have “limited room” to cut its own interest rates further, saying that rates are “already at a relatively low level”. China last cut its policy interest rate in August.

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The bigger problem for the economy, Wang said, is that it faces insufficient demand for financing, rather than high funding costs.

Authorities also need to take urgent action to help consumption recover, Wang said, citing concerns about weakening external demand. Infrastructure investment will also probably slow from this year, he added.

Wang said the government should run a larger budget deficit in 2023 while optimising the debt structure for local governments. He also advocated for structural reforms, such as providing better public welfare programmes to counter long-term challenges, such as the ageing population. BLOOMBERG