China near government growth target at 4.9% for 2023: Report

Growth is expected to moderate in the second half of this year before easing to 4.5 per cent next year. Inflation is now projected to slow more than previously forecast, in line with weaker-than-expected domestic demand and softer global commodity prices. The forecast for consumer price inflation is revised down to 0.7 per cent this year but remains at 2.0 per cent next year, according to the Asian Development Outlook (ADO) September 2023.

Domestic demand should continue to improve in the second half of this year, but at a slower pace. Growth in manufacturing investment is expected to moderate, while infrastructure investment is likely to remain solid because of supportive government policies. As external trade weakens, slowing net exports will remain a drag on growth. Consumption, meanwhile, should continue to recover.

Fiscal policy is expected to remain supportive for the rest of the year, as the government may increase the amount of credit offered by policy banks and use central bank lending facilities to support economic recovery. Monetary policy is also expected to continue to support recovery. Enabled by modest domestic inflation, a reduction in the required reserve ratio for commercial banks is expected to spur credit growth.

External trade should continue to moderate in the second half. China exports weakened in the second quarter, after a surge in March and April as suppliers filled order backlogs following COVID-19 and supply chain disruptions. The effects of interest rate hikes last year in the US and Europe will continue to weigh on economic activity in advanced economies, which will likely restrain China’s exports.

ALCHEMPro News Desk (NB)