Adept at bal­anc­ing many fields

China Daily (Hong Kong) - - 2016-17: REVIEW & PREVIEW - Xin Zhim­ing RE­PORTER’S LOG

If real es­tate prices can serve as a barom­e­ter for mon­i­tor­ing a coun­try’s eco­nomic vi­tal­ity, one would think the Chi­nese econ­omy was at its peak in 2016. Ac­tu­ally, it wasn’t.

Home prices had risen strongly in ma­jor cities since the start of the year af­ter ris­ing al­most un­in­ter­rupt­edly for about 10 years. The coun­try’s eco­nomic growth rate, how­ever, has grad­u­ally weak­ened since 2010 — and slowed to a 25-year low of 6.9 per­cent in 2015, as the world’s sec­ond-big­gest econ­omy con­tin­ues to shift away from its man­u­fac­tur­ing roots.

We can un­der­stand the dif­fi­cul­ties faced by the Chi­nese econ­omy at the start of the year by tak­ing a look at the head­lines of many re­search re­ports by eco­nomic an­a­lysts at that time: Why the ren­minbi slumped against the dol­lar? Weak start for 2016 — Jan­uary data pre­view. Slow start for 2016 — Fe­bru­ary data pre­view ...

Back then, few an­a­lysts were up­beat about the prospects of the Chi­nese econ­omy for this year. UBS Se­cu­ri­ties, for in­stance, pre­dicted its growth could slump to 6.2 per­cent year-on-year, down from 6.9 per­cent for 2015. In­deed, the sharply fall­ing yuan, de­clin­ing for­eign ex­change re­serves, slump­ing stock in­dexes, weak eco­nomic ac­tiv­i­ties — all in­di­ca­tors pointed to a weak per­for­mance that many an­a­lysts thought would not re­cover any time soon.

For­tu­nately, the un­ex­pected real es­tate boom and mon­e­tary ex­pan­sion, which was less un­ex­pected, have pro­vided a solid pil­lar to but­tress growth. The 6.7 per­cent growth in the first quar­ter, although not su­perb, nev­er­the­less brought home to China watch­ers that the econ­omy re­mained quite re­silient.

In the next two quar­ters, the Chi­nese econ­omy con­tin­ued to forge ahead to achieve a growth within the pre­set tar­get range of 6.5 per­cent to 7 per­cent against the head­wind of global fi­nan­cial tur­bu­lence as a re­sult of the UK’s Brexit vote in June and the in­ter­est rate hike by the US Fed­eral Re­serve this month.

As the year-end drew near, the yuan be­gan slump­ing again against the dol­lar — just as it did at the start of the year. The de­creas­ing for­eign ex­change re­serves, again, led to con­cerns about un­af­ford­able cap­i­tal out­flows. And the never-end­ing talk of US in­ter­est rate hike and the win­ning of the US pres­i­den­tial elec­tion by Don­ald Trump, who seems to be more pro­tec­tion­ist than his pre­de­ces­sor, have brought new un­cer­tain­ties to the world econ­omy.

But China is no longer what it was at the start of the year. Af­ter a tur­bu­lent year, it has ac­cu­mu­lated more ex­per­tise in bal­anc­ing eco­nomic re­struc­tur­ing, growth and man­age­ment of fi­nan­cial risks. Even if its growth rate con­tin­ues to dip next year, pol­i­cy­mak­ers would be more com­posed in nav­i­gat­ing the world’s sec­ond-largest econ­omy through un­char­tered wa­ters.

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