Outlook for China’s economy in 2023
A shaky global economy may present China’s economy with some of its most severe challenges in recent memory. The nation’s real estate market has lost the trust of consumers, and businesses are struggling to get the money they need to expand. According to Logan Wright, a partner and director of China Markets Research at Rhodium Group, it is virtually hard to forecast China’s growth rate for the upcoming year. After spending several years in China, Wright just returned to the US. She believes some primary reasons are undoubtedly at play.
Due to the rapid expansion of shadow banking and the tightening of monetary and regulatory constraints in response, the Chinese economy has faced considerable difficulties. Credit availability has decreased due to these reforms, which has impacted the economy, including challenges for real estate developers and defaults by smaller banks and corporate bonds. There are also worries about the housing market’s diminishing demand and a declining working-age population, which could result in a further population decline. The Chinese government will, therefore, probably have to think about how to react to these shifting economic circumstances.
Startups are experiencing a lack of funding
Yiqing Chen, CFO of Ascentage Pharma, a biopharmaceutical company, has commented on the decline in funding available in the capital markets, which has affected business activity in China and the US. As a result, companies in the industry, including Ascentage Pharma, have had to adapt by redistributing limited budget resources and setting up new teams. Chen is concerned that the downturn in the sector may accelerate, potentially leading to small biotech companies being acquired by larger pharmaceutical companies.
Supply chain struggles persist
Manufacturers in the automotive industry have recovered from the shock to supply chains caused by the pandemic, but other industries are still struggling with logistics. The chemical industry has experienced capacity shortages in international and domestic transportation, leading to a rise in the price of chemical raw materials. The CFO of PayPal China expects it will take another six to 12 months for the supply chain to return to normal but warns that high inflation and global geopolitics will continue to impact the economy. The chemical industry may take some time to recover to pre-pandemic levels fully.
China has received international attention due to its efforts to control COVID-19 outbreaks, including implementing lockdowns in Shanghai that have disrupted business activity and potentially led to economic slowdowns. Despite these challenges, businesses such as Pulcra China and the New World Wuhan Hotel have tried to adapt by reducing staff, cross-training existing employees, outsourcing work, and using technology for remote work and process automation. However, the COVID-19 pandemic has caused significant disruptions, including “drastic fluctuation” in the hotel’s business. Infections continue to rise as COVID-19 controls are eased in some areas of China.
Despite the difficulties caused by the COVID-19 pandemic, Janet Yan, finance director of the New World Wuhan Hotel, sees opportunities for increased spending, particularly from high-income groups, and a fast market rebound. Cindy Jing, managing director of chemical manufacturer Pulcra China, is also optimistic about the future and sees new business opportunities in the government’s focus on sustainability. Pulcra is planning for growth in China through expansion, including investing in a new operation site in Jinshan to increase capacity and serve the Chinese market and neighboring countries and regions.