2022 was not a good year for the Chinese economy. In 2022, the COVID-19 epidemic, which started in December 2019, caused significant economic disruptions in the second quarter, especially in Shanghai, resulting in a real rate of growth for the Mainland economy of only 3.0% for the year as a whole. This is the second lowest annual rate since economic reform and opening began in 1978.

Despite a slowing of global economic tailwinds, China is expected to see 4.7 percent growth next year for many reasons, including domestic consumption. Government spending will expand, and private investment will be encouraged. All in all, China will gradually see a return to economic boom times.

Colossal structural shifts are taking place in the global economy, as evidenced by the huge challenges of the ongoing year. In 2023, China is moving toward recovery, but the West will cope with recession and the specter of a debt crisis.

China’s market reforms and economic restrictions have transformed its economy into a more capitalistic state since 1979. What can it do to ensure equality as costs of living rise and income disparity becomes more pronounced?

In 2020, Sebastian Mallaby of the Council on Foreign Relations announced the beginning of the “age of magic money,” in which advanced economies would “redefine the outer limits of their monetary and fiscal power.” By July 2022, Mallaby was predicting that this age was coming to an end. But, while most major central banks are now reversing quantitative easing (QE) and raising interest rates, China may need to head in the opposite direction.

We are living in a very different world. Shifting macroeconomic trends including diversification and second sourcing because of de-globalization and de-coupling have significant implications for the global economy. The strategic competition between the United States and China and other major geopolitical developments will fundamentally shape the world we live in.

Modernization is the only way forward for China, which is offering enormous opportunities, not threats, to the world. There is every reason to seek areas of mutual benefit with the United States and the road map to the future, if followed, will be good for China and good for America.

After the 20th Party Congress, relations with the U.S., Europe and Japan are likely to improve, as China continues to pursue high-quality development and the integration of domestic demand with supply-side structural reforms.

Last January, China’s government forecast that the country’s economy – which, at the time, was experiencing a strong rebound after the initial pandemic slowdown – would grow by 5.5% in 2022. But by the second quarter, unfortunately, the rapid spread of the Omicron variant of COVID-19 had forced the government to implement emergency containment measures in its most economically dynamic cities, including Beijing, Guangzhou, Shanghai, and Shenzhen.

China’s economic troubles in 2022, exacerbated by zero-COVID regulations and stiff barriers for travel and exports, have caused consumer demand to hit a new low. The digital yuan, the first centrally backed crypto token, could be the solution Beijing needs to restore consumer trust in their economy.