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China’s Economic Recovery Raises Hope for Global Economy andcountries like Pakistan

China has managed to achieve a “modest” economic recovery post-pandemic, despite facing various challenges such as a slowdown in the real estate sector, weak domestic demand, high local government debt, deflation, oversupply in some sectors due to lower exports, rising youth unemployment, and declining foreign investment.

The fact that China has defied expectations of economic downturn is not only good news for the global economy but also for countries like Pakistan that heavily rely on Beijing for investments, trade, and financial support.

Following the lifting of Covid Zero restrictions early last year, China’s economic performance has impressed the International Monetary Fund (IMF). The IMF revised China’s GDP growth projection to 5.4% for 2023 and 4.6% for 2024, which represents an increase from its previous estimates.

J.P. Morgan, an American investment bank, predicts a roller-coaster year for China in 2023. While growth is expected to be around 5% real GDP growth, which is respectable but slower than the pre-Covid period, the bank remains optimistic about China’s economic recovery.

China’s Central Economic Work Conference (CEWC), considered a key indicator of economic policies, outlined priorities for 2024. These priorities include promoting science and technology innovation, strengthening domestic demand, ensuring stability, development in rural areas, and investing in low carbon and ecological initiatives. The conference acknowledged that although there are still obstacles to overcome, the favorable conditions outweigh the unfavorable factors in China’s developmental landscape, and the overall trend of economic recovery remains positive.

To support further economic recovery, China plans to ramp up policy adjustments throughout this year. The CEWC called for balanced progress and stability, highlighting the need for counter-cyclical and cross-cyclical adjustments of macro policies. China will continue implementing proactive fiscal and prudent monetary policies while prioritizing high-quality development. This includes increasing spending, providing liquidity in the banking sector, and boosting domestic demand.

China changed its fiscal stance in the third quarter of last year by accelerating spending, assisting local governments with their debt issues, and introducing stimulus packages for infrastructure investment and housing construction. The country also exceeded the 3% of GDP “glass ceiling” on budgetary deficits.

Analysts anticipate a more expansionary fiscal stance of 1.5-2% of GDP this year, assuming a 3.8% GDP fiscal deficit target and the full implementation of a CN¥1 trillion ($140.7 billion) infrastructure stimulus package to stimulate stagnant demand.

The CEWC’s priorities focus on scientific and technological innovation to advance the industrial system, boosting domestic demand, deepening fiscal and tax reforms, opening up industries such as healthcare and services, and ensuring stability in the financial sector, especially in the property market.

While China’s recovery is crucial for the global economy, there are concerns that any delays in its recovery could adversely affect other countries and regions. Pakistan, in particular, may face challenges as it relies heavily on China for trade and investments. The UNCTAD included Pakistan in the list of 20 economies most affected by China’s economic slowdown in 2020.

Although Pakistan’s exports to China are relatively low, any slowdown in the Chinese economy could impact the country’s export revenues, particularly for commodities such as rice and yarn. Furthermore, if China’s economy does not rebound quickly, it may affect Chinese investments related to the Pakistan Economic Corridor initiative.

To mitigate these risks, experts suggest encouraging business-to-business joint ventures to create jobs and boost exports to China and the rest of the world. China is already seeking joint ventures with credible businesses in Pakistan to establish factories in different industrial sectors. Business-to-business cooperation in export industries could help strengthen economic ties between the two countries.

China’s economic recovery is a positive sign for the global economy and countries like Pakistan. However, the potential challenges and risks must be carefully navigated to ensure sustained growth and stability.

Source: [Dawn](https://www.dawn.com)