Page 8 - 2023 White Paper on the Business Environment in China
P. 8
3 White Paper on the Business Environment in China
President’s Message
China’s economy is set to trade, supply chains, and remittances as well
rebound in 2023 as as an historic surge in refugee flows. And three,
mobility and activity pick up after the lifting reduced business confidence and higher investor
of pandemic restrictions, providing a boost to uncertainty weighs on asset prices, tightening
the global economy. The economy will expand financial conditions and potentially spurring
5.2 percent this year versus roughly 3 percent capital outflows from emerging markets. Russia
last year. That’s good news for China and the and Ukraine are major commodities producers,
world as the Chinese economy is now expected and disruptions have caused global prices to soar,
to contribute a quarter of global growth this especially for oil and natural gas. Food costs have
year. Even so, China still faces significant jumped, with wheat, for which Ukraine and Russia
economic challenges. The contraction in real make up 30 percent of global exports, reaching a
estate remains a major headwind, and there is record. Beyond global spillovers, countries with
still some uncertainty around the evolution of direct trade, tourism, and financial exposures will
the virus. Longer-term, headwinds to growth feel additional pressures. Economies reliant on oil
include a shrinking population and slowing imports will see wider fiscal and trade deficits and
productivity growth. more inflation pressure, though some exporters
such as those in the Middle East and Africa may
After three years of implementing its “zero- benefit from higher prices.
COVID” strategy, China has dropped all COVID
restrictions, but the virus is not something that The war in Ukraine may contribute to the
will be eradicated or eliminated. People in China— dangerous divergence between advanced and
and around the world—are going to be dealing emerging market and developing economies.
with COVID in 2023 and into the future. Like More broadly, it risks fragmenting the global
everywhere else, COVID will come and go. We're economy into geopolitical blocs with distinct
already seeing indications that cases may have technology standards, cross-border payment
peaked in major cities, but that's going to happen systems, and reserve currencies. Such a tectonic
at different times across the country. shift represents the most serious challenge
to the rules-based system that has governed
The economic fallout from Russia’s invasion of international and economic relations for the last
Ukraine is another massive setback to the global 75 years, jeopardizing the gains made over the
economy. The toll on Ukraine is immense, but the past several decades. An end to the war and a just
impact stretches far beyond Ukraine’s borders. peace for Ukraine would be the most impactful
Beyond the suffering and humanitarian crisis way to affect the economic outlook, but until this
from Russia’s invasion of Ukraine, the entire global happens, governments should deploy measures
economy continues to feel the effects of slower for a stronger and sustainable recovery. While
growth and faster inflation. Impacts are flowing some effects may not fully come into focus for
through three main channels. One, higher prices many years, there are already clear signs that
for commodities like food and energy are pushing the war and resulting jump in costs for essential
up inflation further, in turn eroding the value of commodities will make it harder for policymakers
incomes and weighing on demand. Two, those in some countries to strike the delicate balance
most involved including neighboring economies between containing inflation and supporting the
in particular are grappling with disrupted economic recovery from the pandemic.
8
President’s Message
China’s economy is set to trade, supply chains, and remittances as well
rebound in 2023 as as an historic surge in refugee flows. And three,
mobility and activity pick up after the lifting reduced business confidence and higher investor
of pandemic restrictions, providing a boost to uncertainty weighs on asset prices, tightening
the global economy. The economy will expand financial conditions and potentially spurring
5.2 percent this year versus roughly 3 percent capital outflows from emerging markets. Russia
last year. That’s good news for China and the and Ukraine are major commodities producers,
world as the Chinese economy is now expected and disruptions have caused global prices to soar,
to contribute a quarter of global growth this especially for oil and natural gas. Food costs have
year. Even so, China still faces significant jumped, with wheat, for which Ukraine and Russia
economic challenges. The contraction in real make up 30 percent of global exports, reaching a
estate remains a major headwind, and there is record. Beyond global spillovers, countries with
still some uncertainty around the evolution of direct trade, tourism, and financial exposures will
the virus. Longer-term, headwinds to growth feel additional pressures. Economies reliant on oil
include a shrinking population and slowing imports will see wider fiscal and trade deficits and
productivity growth. more inflation pressure, though some exporters
such as those in the Middle East and Africa may
After three years of implementing its “zero- benefit from higher prices.
COVID” strategy, China has dropped all COVID
restrictions, but the virus is not something that The war in Ukraine may contribute to the
will be eradicated or eliminated. People in China— dangerous divergence between advanced and
and around the world—are going to be dealing emerging market and developing economies.
with COVID in 2023 and into the future. Like More broadly, it risks fragmenting the global
everywhere else, COVID will come and go. We're economy into geopolitical blocs with distinct
already seeing indications that cases may have technology standards, cross-border payment
peaked in major cities, but that's going to happen systems, and reserve currencies. Such a tectonic
at different times across the country. shift represents the most serious challenge
to the rules-based system that has governed
The economic fallout from Russia’s invasion of international and economic relations for the last
Ukraine is another massive setback to the global 75 years, jeopardizing the gains made over the
economy. The toll on Ukraine is immense, but the past several decades. An end to the war and a just
impact stretches far beyond Ukraine’s borders. peace for Ukraine would be the most impactful
Beyond the suffering and humanitarian crisis way to affect the economic outlook, but until this
from Russia’s invasion of Ukraine, the entire global happens, governments should deploy measures
economy continues to feel the effects of slower for a stronger and sustainable recovery. While
growth and faster inflation. Impacts are flowing some effects may not fully come into focus for
through three main channels. One, higher prices many years, there are already clear signs that
for commodities like food and energy are pushing the war and resulting jump in costs for essential
up inflation further, in turn eroding the value of commodities will make it harder for policymakers
incomes and weighing on demand. Two, those in some countries to strike the delicate balance
most involved including neighboring economies between containing inflation and supporting the
in particular are grappling with disrupted economic recovery from the pandemic.
8
