Power of resilience: How China navigates changing economic landscape

People visit the Yuyuan Garden during the week-long National Day holiday in Shanghai, east China, Oct. 2, 2021. (Xinhua/Wang Xiang)

The year 2021 saw almost all economies at the crossroads amid headwinds from COVID-19 to energy shortages and inflation. Yet China -- the only major economy to grow last year -- again demonstrated the power of resilience.

Despite multiple challenges, China's economy has seen a largely steady recovery this year and is set to achieve major annual targets, Chinese Premier Li Keqiang said while presiding over a recent symposium on the economy.

Recent economic data backs the premier's remarks. From foreign trade and industrial strength to vibrant consumption and inbound investment, the Chinese economy provides abundant evidence of its tenacity.

China's imports and exports of goods expanded to 31.67 trillion yuan (about 4.95 trillion U.S. dollars) in the first 10 months of 2021, 130 billion yuan higher than the pre-pandemic goods trade level for the whole year of 2019, official data showed.

"Global exports are mainly supported by prices. However, volumes have made a greater contribution to China's exports than prices in 2021, suggesting China's exports are indeed resilient," said a report by China International Capital Corporation Limited (CICC).

Bai Ming, a researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, attributed the stable foreign trade to strong external demand as China's complete industrial system continued to play a key role in stabilizing the global industrial chain.

Industrial activities are holding up well against rising producer prices, sporadic resurgence of the epidemic and energy strain, as the government's epidemic control proved effective and efforts at ensuring stable prices and energy supply paid off.

In October, China's industrial production beat market expectations by reporting a 3.5 percent year-on-year rise, up 0.4 percentage points from September.

China's vibrant consumption and its lure for foreign investors also stood out, as the country's October retail sales rose above forecasts and foreign direct investment in 2021 is expected to post double-digit growth.

While worries run high over spillover effects of major developed economies' monetary policy adjustment on emerging markets, China's central bank said the adjustment will have "limited" impact on the country.

This resilience could be attributed to China's huge economic size, normal monetary policies, progress in market-oriented reform of the exchange rates of the Chinese currency as well as increasing attractiveness of Renminbi assets, the People's Bank of China said in its latest quarterly report on monetary policy implementation.

LONG-RUN GAINS

A key to sustaining China's economic vitality is the government's determined focus on reforms needed for long-term development, while sound economic fundamentals in return give China leeway to pursue more sustainable growth.

After accomplishing its "first centenary goal" of building a moderately prosperous society in all respects, China's leadership has put common prosperity in a more prominent position, aiming at affluence shared by everyone, both in material and cultural terms.

On carbon reduction, China in October unveiled an overarching guideline to achieve its carbon peak and carbon neutrality goals as well as an action plan to peak carbon dioxide emissions before 2030.

Also this year, China imposed intensive regulations on certain fields including tech, property and high-emission sectors to rein in disorderly expansion of capital and foster more sustainable and inclusive growth in the long run.

The CICC report noted that real estate regulation is conducive to the healthy development of the economy in the medium and long term, just as the carbon peak and carbon neutrality initiatives will improve the quality of China's economic growth.

Benefits of these far-reaching measures can already be felt. Morgan Stanley in a recent report forecast higher infrastructure investment growth next year driven by green investment. Manufacturing investment demand could also arise from equipment upgrades to improve energy efficiency, according to the report.

That said, authorities are cool-headed and prepared to brace for uncertainties, with more policies in the pipeline to shore up the resilience of the economy.

There are multiple challenges ahead for the Chinese economy to sustain stable growth from a high base, as new downward pressures emerged and domestic and external economic environment continued to be complex, the premier said during the symposium.

Efforts should be made to roll out new preferential tax policies, guarantee stable power supply, support new business models such as cross-border e-commerce, among others, to keep Chinese economy running within an appropriate range and ensure stable employment, according to Li.