The European Union (EU) Chamber of Commerce in China suggests that China’s economic recovery could regain momentum by focusing on policy support for demand rather than supply. In its recent position paper titled ‘European Business in China 2023/2024’, the chamber emphasized the importance of this shift, highlighting that supply-side policies have contributed to significant trade imbalances between China, the EU, and the United States.
Addressing these imbalances is crucial to prevent potential reactions from overseas governments, as growing trade deficits and limited reciprocal market access are cited as key grievances by European politicians, affecting China’s international relationships, the paper noted.
The chamber also stressed the importance of implementing policies to attract and retain foreign talent in China, particularly in the wake of the pandemic-induced outflow of foreign workers. They contribute significantly to innovation, efficiency, and productivity, which is crucial for the country’s high-quality growth trajectory.
Additionally, the chamber highlighted challenges in market access due to overly rigid regulations across sectors, which deter foreign investment.
The anticipated release of pent-up demand did not materialize as expected, leading to prolonged contractions in manufacturing activity, producer prices, and industrial profits.
Moreover, China is facing demographic challenges, with the fading demographic dividend and record-high urban youth unemployment in 2023, adding further pressure to the country’s recovery efforts. Addressing these issues through targeted policy interventions could help revitalize China’s economic momentum and foster sustainable growth in the long term.
