Centering on economic construction to stabilize general socioeconomic conditions while fully promoting economic recovery: Outlook, policy simulations, and reform implementation—A summary of the annual SUFE macroeconomic report (2022–2023)

Abstract

The Chinese economy upheld a frail recovery in 2022 under the triple superposition of contraction of demand, disruption in supply, and weakening expectations, aggravated by unanticipated adverse shocks in the midst of global turmoil. Over the year, rising income uncertainty set off by the pandemic shock continued depressing household consumption and housing demand. Trade also saw slowing growth, along with consumption and investment, with sluggish residential investment awaiting policy stimulus to take force. Unemployment rate remained high, and was much higher for youth engendered by severe structural imbalances in the labor market. Local government debt burden worsened while revenue shrinking, only to exacerbate the local fiscal financial risk. It fared better on the price side. While growth in producer price index kept falling, consumer price index maintained steady growth. Renminbi depreciated against USD through fluctuations with larger swings, but the exchange rate remained in a manageable band. The Institute for Advanced Research-China Macroeconomic Model projects the baseline growth rate in real gross domestic product to be 5.4% in 2023. We have also used the model to conduct alternative scenario analyses and policy simulations to assess the impacts of potential downside risks or favorable situations. Our findings call for a focus on economic construction with deepening reform and opening up more comprehensively and initiatively. Only by doing so can China spur market vitality, strengthen business confidence, and forge competitive advantages.