In March 2022, the Chinese government set a target of 5-5.5 percent GDP growth for the year. At the time, such growth levels appeared perfectly attainable. But within a month, the Omicron variant arrived, triggering strict lockdowns that, while stemming the spread of the coronavirus, caused serious damage to the supply and demand sides of the economy. China's growth rate for 2022 was just 3 percent.

Today, however, things are looking up for China's economy. Following the government's rapid shift away from its zero-COVID policy in December — and especially since the middle of last month — the economy has sprung back to life. This renewed vitality was on display during the Spring Festival holiday in late January, when more than 300 million Chinese hit the road, up 23 percent from last year.

There are good reasons to expect significantly higher growth in 2023. For starters, the headline rate will reflect the low base in 2022. Given 4.8 percent average GDP growth in 2019-22, a back-of-the-envelope calculation suggests that China should be able to achieve GDP growth of around 6 percent in 2023.

Moreover, China still has ample room for expansionary monetary and fiscal policy. In the monetary realm, there is space to lower both the reserve requirement for banks and policy interest rates, such as the seven-day reverse repo rate and the medium-term lending facility.

As for fiscal policy, there are widespread — and legitimate — concerns about China's high leverage ratio. But the government's debt-to-GDP ratio remains significantly lower than that of most advanced economies. Add to that China's faster GDP growth and high savings rate, and it is clear that China's fiscal position is much stronger than it is for most developed countries.

Given the grim global outlook, exports cannot be expected to be a major driver of growth this year, despite making an important contribution to growth in 2022. Consumer demand can support growth, if it recovers strongly: in 2022, final consumption in China contributed just 32.8 percent to GD.