Over the 45 years since the China-Japan Peace and Friendship Treaty, the economic scale of the two countries has shifted. In addition, their economic structures have evolved, moving beyond an era of asymmetric dependence to a new phase characterized by mutual reliance.

Forecasts are not in line with reality. China’s economy is doing better than some analysts believe. Yet, alternative strategies must be found. A multi-pronged approach will cover the void left by real estate adjustments and lead China’s economy to a promising future.

China’s economic performance has been inspiring considerable pessimism lately. In the second quarter of 2023, the Chinese economy grew by just 6.3% from a year earlier – a figure that is disappointing because of the low base in the second quarter of 2022, when pandemic restrictions were still suppressing economic activity. And in July, China’s consumer price index (CPI) entered negative territory for the first time since 2021, sparking fears of a deflationary spiral.

China's economic growth has slowed while American politicians continue to advocate for protectionism, which is concerning as history shows that free markets are key to prosperity. China's struggles underscore the need for more economic freedom, not less.

Incentives from the government are positive effect. In the next stage, the import and export power of private enterprises will be unleashed. This, in turn, will stimulate private investment. All factors point to a full economic recovery.

The United States has seen consistent monthly growth throughout the year, but certain risk factors are accumulating. The future trajectory of the U.S. economy will depend on the relative development of economic growth drivers and the potential risks. China must respond thoughtfully.

The Chinese economy is underperforming relative to its growth potential. Not only are investment and consumption demand weaker than hoped, but the country is facing the challenge of two Ds: deflation and debt. While consumer-price inflation is close to negative territory, producer-price inflation has already been negative for a year. At the same time, the private and public sectors have accumulated massive debts, owing to higher spending during the pandemic and the broader response to the easy-money conditions of previous years.

China’s aggregate demand has weakened significantly over the past three years. In addition to the enduring effects of China’s anti-COVID policy, the country has also been weighed down by the decrease in global demand. Exports fell by 14.5% year on year in July, a stark contrast from the robust 17.2% export growth recorded in July 2022. Given these downturn pressures, the government’s decision not to announce a massive stimulus package, as many had anticipated, has left foreign and Chinese observers deeply perplexed.

China's economic slowdown is no longer the main contributor to global growth, but the rising strength of developing Asian economies offers hope for sustained global economic activity in 2023.

GDP in the first half of 2023 increased 5.5 percent year-on-year as the country steadily left the COVID crisis behind. But the goal is not just short-term GDP improvement. If China sticks to its people-centered approach, it will create an ongoing pattern of high-quality development.