China will stay on a positive trajectory this year, but its achievements did not come easily. Some fundamentals still need to be addressed, as the foundation underpinning the recovery is not yet rock solid. Boosting incomes would make a difference.

It is the mission of the think tank to stay on high alert against potential risks and explore possible solutions to challenges. The international system is currently undergoing the most dramatic changes since the end of the Cold War. The peaceful and open international environment, which has been taken for granted over the last four decades, is now overshadowed by formidable challenges. In this context, it is the think tank’s responsibility to explore and identify external security risks that might pose threats to China in the months and years ahead.

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.

The race of geopolitical strategies based on infrastructural development abroad is a part of the new great powers rivalry. The so-called geo-economics contest (Luttwak) is the new global battle, a competition through commerce for getting economic advantages at the intersection of investments and loans, contracts opportunities, conquest of more worldwide market share and improvement of own supply chains, with the declared noble aim of contributing to global development.

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.

As the internationalization of currencies in emerging economies advances, a multipolar monetary system will result. Look for an international monetary system characterized not by a single currency alone but by multiple players.

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.

After the Xi-Biden meeting in Bali, attention should turn in earnest to a global vision in which the two countries share a common obligation — supporting globalization and multilateralism — not only to manage differences but also to avoid economic fragmentation.

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.

The meeting of presidents Xi Jinping and Joe Biden in Bali may be the first step toward restoring normal bilateral ties between China and the United States. The leaders discussed their respective red lines and agreed to resume talks on several topics. But a trust deficit remains.