Defusing Triple Pressure to Promote High-Quality Economic Development Rapidly

Abstract

Since the 18th National Congress of the Communist Party of China (CPC), the quality of China’s economic development has been continuously improved. However, the year 2022 witnessed a subdued economic growth rate. The triple pressures continue to evolve, with contraction in demand as the primary contradiction facing China’s macro economy in the short term. In contrast to major economies in the world, China grapples with a low economic growth-inflation index combination, a pace of economic expansion trailing behind its potential, and a mounting unemployment rate. The impact of supply on price increases weakens, while the global industrial and supply chains are amidst continuous adjustments. Both the consumer confidence index (CCI) and the purchasing managers’ index (PMI) remain low. The expectation for the depreciation of the RMB against US dollar is weakening. In 2023, China will continue to improve the financing environment and carry out a proactive fiscal policy. Simultaneously, there is a moderation trend in the trajectory of the interest rate of the Federal Reserve System hikes. Taken together, these factors (triple pressures) are expected to mitigate the contraction in demand, thereby steering the economy toward robust growth. However, it is crucial to recognize that low economic growth in the long term may compromise the quality of economic development. The year 2023 is the first year of accelerating Chinese modernization after the 20th National Congress of the CPC. China should integrate the strategy to expand internal demand with its efforts to deepen supply-side structural reform. This can foster the coordinated growth of both economic quality and speed, making a good start for Chinese modernization.

Keywords

high-quality development / output gap / strategy to expand domestic demand / supply-side structural reform

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2024 Higher Education Press