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WANG Dan: "Competition from domestic firms will be a bigger challenge than geopolitical tensions"

Expert background: Dr. WAND Dan – one of China’s leading economists

WANG Dan is the chief economist at Hang Seng Bank China, based in Shanghai. Dan holds a PhD in economics from the University of Washington, with a focus in macroeconomics, environmental economics and econometrics. Her postdoc was with the Chinese Academy of Sciences in agriculture.

She has been keynote speaker for AmCham and other chambers of commerce, embassies, local governments, industrial conferences and universities guest lectures. She’s regularly quoted in CNBC, Bloomberg, WSJ and other major international media and columnist for FT China. Before joining Hang Seng Bank, Dan was previously an analyst at the Economist Intelligence Unit in Beijing.


CMG: So far, the Chinese government has been very cautious with both monetary and fiscal stimuli amid an economic downturn that worries many. Q3 economic data, however, suggest a slight improvement. What are the key economic challenges and risks the Chinese policymakers face ahead of the Third Plenum?

China’s macroeconomic policies clearly prioritize long term economic security over the short term stimulus. The main drivers for growth had been housing and infrastructure but both were depressed in the past two years. Just by a natural rebound in consumption and investment in 2023, due to a low base effect in 2022, it’s not difficult to reach the 5% GDP growth target. The economic recovery has certainly been slower than expected. Stress in the job market and income growth has increased.

The biggest challenge before the plenum is to stabilize the housing market and prevent major risk events related with real estate developers and regional banks. Stabilizing the value of RMB is also a major task.

In several Third Plena in the past, the Party introduced relevant economic policy shifts that would shape the way forward in substantial ways. What do you think we can expect in terms of policy adjustment or even reform at this leadership’s Third Plenum, and how will this shape the business environment for foreign companies?

I don’t expect any significant shifts in the policy. In the past three years, repeatedly, the central government has stressed the need to guarantee food security, energy security and supply chain security.

The new government this year, despite having new staff, has followed the spirit of previous policies. For foreign businesses, competition from domestic firms will be a bigger challenge to face than geopolitical tensions. China’s industrial policies have created a large economy of scale across the new energy supply chain and other emerging industries. Cost advantage in those firms will be significant. Foreign firms advantage remains to be in high tech and high-end consumer market.

With consumption and industrial activity picking up, economists have been revising their 2023 GDP projections upward, even above the 5% growth target set in March. Now, the most recent data suggests another cooling down. How optimistic are you about China’s economic performance in both the short- and medium-term, and what do you see as key drivers of that growth?

In 2023 the macroeconomic indicators look OK due to low base effect. The actual economic recovery is limited. Much of the real growth still comes from the government backed projects, such as water engineering, infrastructure building or city renovations.

In the mid term the main drivers for the economy could once again be consumption, similar to the situation before 2020. The high-tech industries will also take a bigger share in the economy. In the next year or two, however, the main driver will be state backed infrastructure building, despite the government debt problem. It will take a long time for private businesses and consumers to restore confidence. In the meantime, it is only the public sector that can afford to extend investment and employment.


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