China continues to become an engine of economic growth in the Asia Pacific region and globally

The latest "Asia Pacific Economic Outlook" report (hereinafter referred to as the "Report") presentation jointly organized by the International Monetary Fund (IMF) and the China Financial Forty Forum (CF40) was recently held in Beijing. The report predicts that the economic growth rate in the Asia Pacific region will increase from 3.8% last year to 4.6% this year, contributing approximately 70% to global economic growth. This year, the Chinese economy is expected to grow by 5.2%, continuing to become an engine of economic growth in the Asia Pacific region and globally.
The report points out that currently, global demand is weakening, inflation rates remain high, and the banking industry in Europe and America is in turmoil, injecting greater uncertainty into the world economic situation. Despite the many challenges facing the world economy, the Asia Pacific region will become the most economically dynamic region in 2023. In addition, there will be differentiation in the performance of different economies in the Asia Pacific region. Specifically, the growth of developed economies in the Asia Pacific region will slow to 1.6%, with the economies of Australia, Japan, and South Korea growing by 1.6%, 1.3%, and 1.5% respectively; The growth rate of emerging markets and developing economies will increase from 4.4% last year to 5.3%.
"The rapid recovery of China's economy will also have a more obvious positive spillover effect on the Asian region." Krishna Srinivasan, director of the IMF's Asia and Pacific Department, said that according to IMF estimates, in general, every 1 percentage point increase in China's GDP growth will drive the average growth of other Asian economies by about 0.3 percentage points. But unlike the spillover effects mainly brought about by investment demand in the past, this spillover effect will be more reflected in the increase in demand in China's consumption and service industries.
Krishna Srinivasan said that the increase in China's domestic demand, especially consumer demand, will become the main driving force for China's economic growth this year, and the benefits of other economies will change accordingly. Some economies benefit from the tourism consumption of Chinese tourists, but for those economies that mainly rely on exporting raw materials to China, the degree of benefit is not so obvious
Peng Wensheng, a CF40 member, Chief Economist of CICC, and President of CICC Research Institute, stated that China's economic growth is very important for the Asia Pacific and global economies. Compared to the latest IMF forecast of 5.2% for China's economic growth rate in 2023, CICC's forecast is 6%. However, China's economic recovery this year is based on last year's low base. Achieving a growth rate of 5.2% or 6% under normal circumstances would be a good result, but considering last year's low base, the annual compound growth rate is still not high. Moreover, from the current price and employment situation, China's current economic growth may still be lower than potential output.
The underlying reason is weak demand, "Peng Wensheng said. On the one hand, due to the impact of the epidemic in recent years, businesses and households have a heavy debt burden, affecting consumption; On the other hand, low-income groups face high income and employment pressures, which are not conducive to consumption. In response, he stated that demand side support policies cannot do without fiscal and monetary support, but the support of monetary policy has become significant, and the more effective policy now is fiscal expansion.