Chi­nese econ­omy still full of power

China Daily (Canada) - - LIFE -

Aglass is filled half­way with wa­ter. Pes­simists would say it’s half empty, while op­ti­mists would say it’s half full. The same is true when it comes to the Chi­nese econ­omy. Quite a few­pes­simists have been fore­cast­ing doom and gloom since the be­gin­ning of the year. How­ever, they have failed to see the coun­try’s re­silience and the new­driv­ing forces that have emerged.

In fact, the re­cent mod­er­a­tion in China’s growth is the an­tic­i­pated re­sult of re­form mea­sures and regulation. This is there­fore the newnor­mal: we are see­ing slower yet bet­ter qual­ity growth helped along by proac­tive and deeper re­forms. Of course, China’s growth rate could eas­ily have ex­ceeded 7 per­cent if the en­ergy- and- pol­lu­tion-in­ten­sive in­dus­tries had been given free rein, or if mas­sive stim­u­lus mea­sures had been ap­plied.

China, how­ever, chose not to opt for this kind of un­sus­tain­able growth – be­cause it would come with a huge cost and would sac­ri­fice the long-term de­vel­op­ment of China and the world.

In­stead, China has cho­sen to fo­cus on the fol­low­ing five key ar­eas: ad­dress­ing ex­cess ca­pac­ity, down­siz­ing prop­erty in­ven­to­ries, ex­pand­ing ef­fec­tive sup­ply, help­ing en­ter­prises re­duce cost and guard­ing against fi­nan­cial risks. This ap­proach, like los­ing weight, won’t be with­out its dis­com­forts or pain. But just as per­se­ver­ance will see one through a diet – to less fat, stronger mus­cles and a health­ier body – so it is with the Chi­nese econ­omy.

De­spite the mod­er­a­tion in growth, the fun­da­men­tals of the Chi­nese econ­omy re­main strong. While the stock and for­eign ex­change mar­kets have their own pat­terns, the key is to look at the big­ger pic­ture. It is true that the 6.9 per­cent growth in 2015 was the low­est for China in 25 years. But this was achieved by an econ­omy that is $10 tril­lion in size. The ac­tual in­cre­ment is equiv­a­lent to the yearly GDP of a medium-sized coun­try and it is larger than the amount gen­er­ated by dou­ble-digit growth years ago.

In other words, against the back­ground of the slug­gish world econ­omy, China re­mains one of the fastest-grow­ing ma­jor economies – and it con­trib­utes over one quar­ter of global growth. Con­sump­tion now ac­counts for two thirds of China’s growth and the ser­vice sec­tor now makes up more than half of GDP.

China’s solid ma­te­rial foun­da­tion, abun­dant hu­man re­sources and vast mar­ket po­ten­tial will con­tinue to pro­vide a sound ba­sis and con­di­tion for sus­tained eco­nomic growth. The gap be­tween the east­ern and western re­gions, and be­tween the ur­ban and ru­ral ar­eas, in­di­cates am­ple spa­ces and un­tapped po­ten­tials for fur­ther de­vel­op­ment. More­over, the on­go­ing process of newin­dus­tri­al­iza­tion, IT ap­pli­ca­tion, ur­ban­iza­tion and agri­cul­tural mod­ern­iza­tion is gen­er­at­ing strong driv­ing forces for growth. China’s fis­cal deficit and govern­ment debt is also se­cure and much lower than that of theUS, Europe and Ja­pan, leav­ing enough room for fur­ther pos­i­tive regulation.

Go­ing for­ward, five newengines will drive for­ward China’s econ­omy. The first en­gine is the 13th Five-Year Plan (2016-20). With its five key de­vel­op­ment con­cepts – in­no­va­tion, bal­anced growth, a green econ­omy, open­ing up and in­clu­sive de­vel­op­ment – this Plan will map out the way for China to get over the “middle-in­come trap” and join the high-in­come economies.

The se­cond en­gine is sup­ply-side re­form. Rather than be­ing a copy of Reaganomics or Thatcherism, China’s sup­ply-side re­form is a re­sponse to the eco­nomic newnor­mal in China. Its core mech­a­nism is to re­place in­ef­fec­tive and low-end sup­ply with ef­fec­tive and high-end sup­ply, which will in­crease com­pet­i­tive­ness.

The third en­gine is open de­vel­op­ment. China will con­tinue to im­prove its do­mes­tic busi­ness en­vi­ron­ment in terms of le­gal, in­ter­na­tional and busi­ness-friendly prac­tices.

The fourth en­gine is China’s ac­tive in­volve­ment in global eco­nomic gov­er­nance and in pro­vid­ing pub­lic goods. The Asian In­fra­struc­ture In­vest­ment Bank, of­fi­cially in­au­gu­rated in Jan­uary, is just one ex­am­ple of this.

The fifth en­gine is in­no­va­tion-driven de­vel­op­ment. China will op­ti­mize the al­lo­ca­tion of key re­sources in or­der to stim­u­late in­no­va­tion, to cre­ate newde­mands and new sup­ply, and to give rise to new­busi­nesses.

Since the fi­nan­cial cri­sis, China has made an out­stand­ing con­tri­bu­tion to global growth. It is widely rec­og­nized as the world’s eco­nomic pow­er­house and has ful­filled its re­spon­si­bil­ity as a key global player. Make no mis­take: that en­gine is still full of power and will con­tinue to bring op­por­tu­ni­ties and ben­e­fits to the world.

“Al­though Zhou was an an­cient state, it had a re­form mis­sion.” This line from a 3000-year-old Chi­nese work, the Clas­sic of Po­etry, best por­trays the coun­try’s com­mit­ment to re­form. To­day, re­form and in­no­va­tion re­main the source of con­fi­dence and strength for China. There is ev­ery rea­son to look to a world-em­brac­ing China for steady progress and for a promis­ing eco­nomic fu­ture.

The au­thor is the Chi­nese am­bas­sador to the UK.

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