Economic might intact: China experts
Top US economists have played down fears of China’s economic slowdown and warned some Americans who wish to contain China economically.
Larry Summers, director of the White House National Economic Council in 2009 and 2010, said China is facing an enormous complex set of challenges but he does not believes this will be as disruptive as some think.
“There is still enormous economic energy in China, and that it is reasonable to hope that it is not extraordinary disruptive slowing,” he said on Wednesday at the Johns Hopkins School of Advanced International Studies (SAIS).
Summers believes that it is also a matter of broad national strategy for the US, saying “this is exactly the wrong moment to embrace the views of those who believe we need to economically contain China”.
The US’ early rejection of the Chinaled Asia Infrastructure Investment Bank (AIIB) and the exclusion of China from US-led Trans-Pacific Partnership deal have been perceived by many as a US scheme to curtail the growing Chinese economic influence.
Summers said the US should position itself in ways to avoid the scenario of a weak Chinese economy rather than in ways that make the scenario more likely.
“We should avoid doing anything to create a sense that we are nervous about the Chinese economic success,” said Summers, a noted economist who had served as Harvard University president and former US Treasury secretary under President Bill Clinton.
Summers believes that kind of nervous attitude at a time of China having difficulties would undermine the important bilateral relationship between the two nations.
Stephen Roach, a senior fellow at Yale University’s Jackson Institute of Global Affairs and former chief economist at Morgan Stanley Asia, said he has always been skeptical of those who take the turmoil in China’s financial markets to negatively interpret what it means for the real economy.
“I think the Chinese economy is performing much, much better than your average market participant would want to conclude right now,” he said on Wednesday at the Brookings Institution in Washington.
Roach cited urban job growth as a strong indicator, with an average of 11 million new jobs created per year over the last three years, compared with the Chinese government target of 10 million jobs.
Chinese official statistics put the annual job creation in the past three years between 12 million to 13 million each year.
He said the answer to the job growth under a slowing economy is the shift to labor- intensive services. Services in China generated about 30 percent more jobs each year.
We should avoid doing anything to create a sense that we are nervous about the Chinese economic success.”
“So it’s quite possible to actually have a slowing GDP growth, firm job growth, and the economy, you know, goes through the early stages of powerful structural transformation,” he said.
“I think the transformative process in China where mix of GDP is far more important than the overall GDP is really the key to the puzzle,” Roach said.
Realizing that the advancing Chinese economy will encounter challenges and problems along the way, Roach said the bottom line is that the transformation is intact and that the economy is not on the brink of a hard landing.
The Chinese government in the past few years has pledged more economic reforms and a transition to a more sustainable economic model, a model that is often described as New Normal. Under that model, economic growth will be moderately slower from the double digits of the previous three decades.
Acknowledging the poor performance of the financial markets and the debt, Roach cautioned people not to underestimate the resilience and capacity of the real side of the Chinese economy to perform much better than many in the West tell people.
Roach has a particular view of the Chinese property market, which many believe is experiencing a big bubble.
He believes the huge demand from China’s massive urbanization will require even more construction over the next 10 to 15 years.
Roach said he would give a great grade to the Chinese government on creating jobs and increasing real wages, but he pointed out that the safety net is still the missing piece in the puzzle.