China’s economy to forge ahead despite challenges
The international environment has changed dramatically since the global financial crisis of 2008, which reduced the global economic growth rate from 3.84% in 2007 to 1.58% in 2008.
Although the global economy slowly recovered after 2010, its growth rate from 2011 to 2019 was lower than before the global financial crisis. In particular, the average growth rate of developed economies from 2011 to 2019 was only 1.87%, much lower than the 2.71% from 1990 to 2007.
In 2018, Donald Trump’s administration further hampered the already weak global recovery by launching a trade war against China. And while the world was still struggling to cope with the effects of the trade war, the COVID-19 pandemic erupted in 2020, reducing global output by 3.5%, a far bigger drop than during the global financial crisis.
Worse still, even before the pandemic could be effectively contained on a global scale, the Ukraine-Russia conflict erupted, dealing another blow to the global economy.
Indeed, China’s external environment has deteriorated to the extreme.
Although the impact of the pandemic appears to be weakening, pandemic-related restrictions have changed little. For example, restrictions on the cross-border movement of people will continue to hamper the recovery of the service industry in countries around the world, not least because the possibility of the emergence of more contagious and deadly variants of the new coronavirus cannot be ruled out. .
But as people adapt to the pandemic, vaccination rates increase, and countries’ pandemic policies mature, the impact of the epidemic on the global economy is expected to gradually diminish, unless that a new, difficult-to-control epidemic occurs.
What should worry China more, however, is the Ukraine crisis, as it will have a huge impact on global trade and supply chains, the global economy as a whole, in the short term. Its impact on the supply of energy, agricultural products, key manufacturing components and global shipping will be far greater than that of the pandemic. Not to mention that Western countries are trying to drive Russia out of the global trading system and industrial chains, and fragmenting the global economy by imposing all kinds of sanctions on Moscow.
The Ukrainian crisis has caused a spike in global energy prices and increased the risk of stagflation in a number of countries. It has also strained the supply of agricultural products, delayed the spring agricultural season in some countries, hurt global fertilizer production and sales, and intensified the food crisis in some countries. And the reduction in the supply of basic raw materials and basic manufacturing components and the problems of upstream high-tech industries, due to the crisis, have disrupted global manufacturing chains.
China cannot be immune to such turmoil in the global economy, the effects of which it could feel through fluctuating supply chains, even though the country may still achieve its 5.5 growth target. % for this year by sticking to the right policies.
China is facing a difficult test due to the increase in COVID-19 infections, driven by the highly transmissible variant of Omicron, which will make it even more difficult to coordinate epidemic prevention and control and economic development. .
But given China’s experience in battling the novel coronavirus, the impact of new outbreaks is expected to be short-lived. As such, China should pay close attention to the impacts of the Ukraine crisis on global trade and supply chains, as this could put additional pressure on it to achieve the targeted growth rate.
And although China can achieve its growth target as long as its macroeconomic policies are sound, it should further stabilize its foreign trade policy and make more efforts to strengthen the supply chains of various industries.
Source: China Daily