Macroscope | How China can protect economic growth as world recession risks rise

China’s shift towards more domestic-driven growth has helped shield its economy from the worst of the global downturn but it has to step up a gear

All it needs is a four-pronged policy to lower interest rates, improve credit conditions, provide more fiscal reflation and maintain a competitive currency at the same time

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Women in traditional costume wait outside a photography shop catering to tourists in Beijing on September 29. Domestic-led growth should provide some forward momentum and the weak yuan will give exporters a competitive advantage. Photo: AP

Published: 10:00pm, 17 Oct 2022

The global economy has an uphill struggle to avoid recession over the next year. The war in Ukraine, the energy price spike, tighter monetary conditions and a slowdown in world trade are throwing growth projections into disarray.

World recession may be avoided but it will require a mighty effort on the part of global policymakers, when time and resources are running out. China will avoid recession but the odds are that this year’s growth will come well below earlier plans for 5.5 per cent, after an 8.1 per cent outturn last year.

Domestic-led growth should be sufficient to provide a reasonable forward momentum and the weak renminbi will ensure China’s exporters enjoy a competitive advantage. China is fortunate to have plenty of policy options to fall back on and it’s time for Beijing to step up a gear to secure the best outcome.

The scale of the economic headwinds facing China’s economy should not be underestimated, not least after recent warnings by the International Monetary Fund that parts of the global economy could slide into recession in the coming months.

The US economy is in a technical recession and the odds are that Europe is not far behind, facing a turbulent time over winter as the impact of Russia’s energy squeeze begins to bite.

Despite this, the IMF seems relatively upbeat on China’s prospects, expecting gross domestic product to rise by 3.2 per cent this year and 4.4 per cent next year. But the economy is still operating below strength, with scope to do better.

.css-1m2rp1p{color:#34b8b5;}Macroscope | How China can protect economic growth as world recession risks rise

Macroscope | How China can protect economic growth as world recession risks rise