Re­form-minded na­tion re­mains pow­er­ful en­gine of global econ­omy

China Daily (Hong Kong) - - BUSINESS -

BEIJING — Doom­say­ers about China’s econ­omy have been wrong in the past, and they are wrong again to­day, said prom­i­nent US econ­o­mist and author Stephen Roach — who added that the coun­try re­ported first half GDP growth of 6.9, ex­ceed­ing the 6.7 per­cent rise in 2016, as well as beat­ing the con­sen­sus of fore­cast­ers.

Fore­cast­ers find it dif­fi­cult to re­sist su­per­im­pos­ing cliches about de­vel­oped economies on China, but they over­look deeper is­sues shap­ing the China growth de­bate, said Roach, who is a se­nior fel­low at Yale Univer­sity’s Jack­son In­sti­tute for Global Af­fairs.

The lat­est bout of pes­simism over the Chi­nese econ­omy has fo­cused on the twin head­winds of delever­ag­ing and a tight­en­ing of the prop­erty mar­ket.

Roach said that China, with a far larger sav­ings cush­ion than oth­ers and a rel­a­tively small sovereign debt bur­den of 49 per­cent of GDP, was in much bet­ter shape to avoid a sovereign debt cri­sis.

There is al­ways good rea­son to worry about the Chi­nese prop­erty mar­ket, but un­like those of other fully ur­ban­ized ma­jor economies, China’s hous­ing mar­ket en­joys am­ple sup­port from the de­mand side, noted Roach, who is the for­mer chair­man of the Mor­gan Stan­ley’s Asian op­er­a­tions.

In­ter­na­tional fi­nan­cial heavy­weights up­graded their out­looks for the Chi­nese econ­omy.

The In­ter­na­tional Mon­e­tary Fund re­cently raised its es­ti­mate for China’s 2017 growth to 6.7 per­cent, 0.1 per­cent­age points higher than its last pre­dic­tion.

The IMF move has been in­ter­preted as a show of con­fi­dence in China’s eco­nomic growth, con­sid­er­ing a solid first quar­ter un­der­pinned by pre­vi­ous pol­icy eas­ing and sup­ply-side re­form, in­clud­ing ef­forts to re­duce ex­cess ca­pac­ity in the in­dus­trial sec­tor.

JP­Mor­gan and No­mura Se­cu­ri­ties raised their an­nual growth fore­casts to 6.8 per­cent from 6.7 per­cent, re­spec­tively, while Cit­i­group and Stan­dard Char­tered Bank both re­vised their 2017 pro­jec­tions up­ward by 0.2 per­cent­age points to 6.8 per­cent.

The ex­pand­ing con­sump­tion and ser­vices in­dus­tries as well as in­creas­ing pri­vate in­vest­ment in China will boost growth de­spite slow­ing in­vest­ment in in­fra­struc­ture and real es­tate in the sec­ond half of the year, on top of a fi­nan­cial delever­ag­ing, said JP­Mor­gan.

The Asian De­vel­op­ment Bank re­vised China’s growth up to 6.7 per­cent this year and 6.4 per­cent next year, from 6.5 per­cent and 6.2 per­cent, re­spec­tively, in its lat­est out­look sup­ple­ment.

The ADB said in­creases in both do­mes­tic con­sump­tion and for­eign trade helped pro­mote China’s eco­nomic out­look, which came as a re­sult of a steady rise in both per­sonal in­come and pub­lic spend­ing.

Ac­knowl­edg­ing China’s slower eco­nomic growth with re­formed struc­tures un­der the new nor­mal, th­ese in­sti­tu­tions showed less con­cern about prospects of a hard eco­nomic land­ing for the coun­try and fi­nan­cial risks com­pared with last year, and in­di­cated that China is ex­pected to con­tinue sta­bi­liz­ing.

“What hap­pens in China doesn’t stay in China,” said Mau­rice Ob­st­feld, IMF chief econ­o­mist. “Strong Chi­nese growth drives growth par­tic­u­larly in Asia, but also through­out the world.”

Strong Chi­nese growth drives growth par­tic­u­larly in Asia, but also through­out the world.” Mau­rice Ob­st­feld, IMF chief econ­o­mist

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