Pre­par­ing for im­pact of cap­i­tal

China Daily (Canada) - - COMMENT - Ma Guangyuan, in­de­pen­dent economist, Beijing News, Oct 29 Ye Tan, business colum­nist, Na­tional Business Daily, Oct 29 fi­, Oct 30, Oct 30 World Bank, China Eco­nomic Up­date, Oct 29

power of an econ­omy de­pends not on the prod­ucts it ex­ports but on its ex­ported cap­i­tal, for the lat­ter bet­ter shapes global eco­nomic pat­terns. There­fore, it is more im­por­tant for China to be­come a cap­i­tal net ex­porter than a coun­try with flour­ish­ing trade data, be­cause it would sym­bol­ize its grow­ing abil­ity to in­flu­ence the global in­dus­trial struc­ture, which is es­sen­tial at a time when it faces eco­nomic slow­down and tran­si­tion.

any ef­fect will re­sult in the with­drawal of QE by the US Fed­eral Re­serve on China’s real econ­omy be­cause its pur­chase of $15 bil­lion a month is very small and global liq­uid­ity lev­els re­main high. But China must pre­pare to tackle another de­vel­op­ment— the flight of high-end man­u­fac­tur­ing in­dus­tries back to the US at an ac­cel­er­ated pace. China’s eco­nomic fu­ture will be de­cided not by the Fed, but by its own re­form poli­cies.

fa­vor­able poli­cies China has im­ple­mented for State-owned en­ter­prises will make it dif­fi­cult to ar­rest the eco­nomic slow­down. China needs to pro­vide equal op­por­tu­ni­ties for SOEs and pri­vate en­ter­prises to help the healthy de­vel­op­ment of the econ­omy.

con­sump­tion has huge po­ten­tial, wait­ing to be cashed in on. This is the gen­eral belief among econ­o­mists and de­ci­sion­mak­ers. So, com­pared with the past mea­sures, the State Coun­cil’s lat­est move of stim­u­lat­ing con­sump­tion will be more ef­fec­tive.

gov­ern­ment’s in­dica­tive growth num­ber for 2015 will sig­nal the pri­or­ity that the au­thor­i­ties put on growth and re­forms. The cur­rent em­pha­sis on meet­ing short-term growth tar­gets will make it more chal­leng­ing to im­ple­ment the poli­cies nec­es­sary to shift growth to a more sus­tain­able medium-term path… China’s key medium-term pol­icy chal­lenge re­mains im­ple­ment­ing re­forms that support China’s next trans­for­ma­tion to­ward more ef­fi­cient, eq­ui­table, and sus­tain­able growth.

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