Buzz around China’s reopening underscores its importance to global economy

Beijing’s vow to prioritise growth and global connections is the confidence boost the world needs
As a major source of trade and investment, and with an ever-growing circle of friends and partners, the significance of China’s return cannot be overstated

Daryl Ng

Published: 8:15am, 31 Jan 2023

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China is reassuring the world that it is reopening, and will continue to reform. Vice-Premier Liu He, China’s economic tsar, raised the curtain on the nation’s comeback at the World Economic Forum in Davos earlier this month. His official affirmation heralded a return to normality, not just for China but for the global economy.

The message, delivered during Liu’s first visit to the annual summit in five years, helped to fuel a sense of optimism about the global outlook and coincided with an upwards-revised forecast for global economic performance in 2023 by the International Monetary Fund.

Investors sat up and took notice, in particular those in Hong Kong. On the last trading day of the Year of the Tiger, the Hang Seng Index jumped 393 points and closed at 22,044.65, the highest level since June 28, 2022.

Doubts about China’s direction in 2023 were laid to rest by Liu. “We will strive to maintain reasonable economic growth and keep prices and jobs stable,” he said. “More focus will be placed on expanding domestic demand, keeping supply chains stable, supporting the private sector, reforming the state-owned enterprises, attracting foreign investment, and preventing economic and financial risks.”

“If we work hard enough, we are confident that growth will most likely return to its normal trend in 2023, and the Chinese economy will see a significant improvement. A noticeable increase of imports, more investment by companies, and consumption returning back to normal can be expected.”

Some global market analysts have reached the same conclusion as Liu. Byron Wien, a strategist at US private equity company Blackstone, predicted 10 surprises in 2023, including this: “China edges toward its growth objective of 5.5 per cent and works aggressively to re-establish strong trade relationships with the West, with positive implications for real assets and commodities.”

China’s Vice-Premier Liu He addresses the World Economic Forum in Switzerland on January 17. Photo: Reuters

In his speech, Liu affirmed that China’s policymakers “must always promote all-round opening up”. He described this as one of the “five musts” that have contributed to China’s achievements over the last decade. Another “must” is to make “a socialist market economy the direction of our reforms. We must let the market play a decisive role in the allocation of resources, and let the government play a better role”.

His clarification on China’s “dual circulation” development strategy also helped to allay the concerns of international investors. Specifically, he said, “for domestic circulation to function well, it must rely on international division of labour and cooperation, as well as more foreign trade and investment.

“Therefore, the new development paradigm of dual circulation is to be pursued in an open economy. China’s national reality dictates that opening up to the world is a must. We must open up wider and make it work better.”

The numbers speak for themselves. China is a major trading partner for more than 140 countries and regions, with its total goods trade up 7.7 per cent year on year in 2022, topping the world for six consecutive years.

China ranked third as a source of foreign direct investment from 2012 to 2021, over which period the capital stock of China’s FDI abroad has soared from less than US$600 billion to over US$2.7 trillion.

Cranes and shipping containers at Yantian Port in Shenzhen, China, on December 25, 2022. Photo: AFP

Chinese general government debt is among the world’s lowest at 47 per cent of GDP as of year-end 2021. That’s even as the country invested a total of 100 trillion yuan (US$13.8 trillion), or about 15 per cent of its annual GDP, in improving its infrastructure over the past decade. By comparison, the European Union has a debt threshold for member states of 60 per cent of GDP.

China is deepening relationships and aligning itself with an expanding bloc of oil-producing countries in its drive for diversification, and that has huge implications for the global financial architecture.

The outlook for private domestic consumption is promising too, as Chinese citizens have stashed away an enormous reservoir in savings. Total household savings reached 121 trillion yuan (US$17.8 trillion) at the end of December, about as much as China’s total GDP in 2022.

Among our close neighbours, goodwill abounds, as trade has deepened with the rest of Asia. From 2012 to 2021, China’s foreign trade increased from US$4.4 trillion to US$6.9 trillion, as it successfully diversified away from its traditional export markets of the United States and EU.

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Xi Jinping says China will build stable supply chain with Vietnam

President Xi Jinping remarked to his Vietnamese Communist Party counterpart Nguyen Phu Trong during a recent meeting that “we look forward to working with Vietnam to accelerate the building of a peaceful, safe and secure, prosperous, beautiful and amicable home together, and to promote regional economic integration in East Asia.

“China is also ready to work with the Association of Southeast Asian Nations to practise true multilateralism and open regionalism.” China has reaffirmed that the Asean is a key priority in its neighbourhood diplomacy and a key region for high-quality cooperation on the Belt and Road Initiative.

China is also a major driving force behind the expansion of the BRICS (Brazil, Russia, India, China and South Africa) organisation, setting an example of cooperation and seeking strength through unity among emerging markets and developing countries.

With the pandemic increasingly under control, there is renewed focus on the world’s most populous market. China is determined to stay on the course of opening up and reform, it is ready to play a bigger role on the global stage, and will create many more opportunities for the world.

Daryl Ng is chairman of the Hong Kong-Asean Foundation (www.hkasean.org), a not-for-profit organisation seeking to contribute to China-Asean relations by serving as a platform to promote and deepen ties between Hong Kong and Asean

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