Outlook: Structural reforms vital to recovery

The World Bank has estimated that China's economy would grow 5.2 percent in 2023, propelled by a gradual recovery of consumer sentiment and policy stimulus.

As global growth is projected to remain tepid at 2.4 percent next year, the world's second-largest economy is expected to expand by 4.5 percent in 2024, according to the latest China Economic Update, released by the World Bank on Thursday.

"There remains the likelihood of a protracted recovery in the real estate sector and persistently tepid external demand. To bolster growth, the government is expected to uphold a moderately expansionary fiscal and monetary policy stance in 2024," noted the document, titled Which Way Forward? Navigating China's Post-Pandemic Growth Path.

The country has already announced such policy adjustments at the annual Central Economic Work Conference, which was held in Beijing on Monday and Tuesday to set the country's economic policy priorities for 2024.

The work conference called for efforts to ramp up countercyclical and cross-cyclical adjustments in macro policies and for efforts to continue implementing a proactive fiscal policy and prudent monetary policy, according to a statement released on Tuesday.

While cross-cyclical adjustments focus more on long-term sustainable growth with long-term solutions to tackle the root cause of the problem, countercyclical adjustments focus more on short-term remedy to put the brake on the current trend.

According to a Xinhua News Agency report, the conference noted that China continues to face challenges such as lack of effective demand, overcapacity in certain sectors and lackluster social expectations. However, favorable conditions outweigh unfavorable factors, and the fundamental trend of the country's economic recovery and long-term positive outlook has not changed.

On Wednesday, the Asian Development Bank revised upward its 2023 growth estimate for China to 5.2 percent from 4.9 percent previously but maintained its growth forecast of 4.5 percent for the economy next year.

In its Asian Development Outlook December 2023, the ADB said that strong services continue to be the main driver of growth in China, offsetting a downturn in the property sector.

It said that supported by policy measures to sustain consumption, industry and the housing market, China's growth picked up to a faster-than-expected 4.9 percent in the third quarter, bringing growth for the first nine months of 2023 to 5.2 percent, up from 3 percent for all of 2022, despite the drag from the property market correction.

This indicates that China remains on track to achieve its growth target of around 5 percent for this year, surpassing most major economies in the world.

The forecasts for China's growth by the World Bank and the ADB are slightly higher than that predicted by the International Monetary Fund, which in its latest World Economic Outlook released in early October cut the country's GDP growth to 5 percent in 2023.

Both the IMF and the World Bank have cited continued weakness in the real estate sector and persistently sluggish global demand as factors that clouded the outlook.

The World Bank also pointed out the structural constraints to growth, including high debt levels, an aging population and slower productivity growth than in the past.

"Macroeconomic policy easing has been supporting the recovery in the short term," said Mara Warwick, World Bank country director for China, Mongolia and South Korea.

"Complementary structural reforms to boost confidence and revive growth momentum, such as improving China's debt-resolution framework and strengthening the enabling environment for private firms, would be important."

The World Bank report also provides insights into China's structural demand shift and medium-term challenges.