Vigor and Vi­sion for Asia

China Pictorial (English) - - Contents - Text by Zhang Jing­wei The au­thor is a re­searcher at the Cha­har In­sti­tute.

The world once again em­braced the Boao Fo­rum for Asia (BFA): Its 2016 an­nual meet­ing was held from March 22 to 25 in Boao of Qiong­hai, Hainan Prov­ince. In at­ten­dance were Chi­nese Premier Li Ke­qiang and state lead­ers of more than 10 coun­tries, as well as some 300 guest speak­ers and 1,700 del­e­gates.

The 15-year-old BFA has risen along­side China’s rapid de­vel­op­ment and ad­dressed global con­cerns of the eco­nomic cri­sis as well as ex­plor­ing mar­ket trans­for­ma­tions in the af­ter­math. Themed “Asia's New Fu­ture: New Dy­nam­ics and New Vi­sion,” al­most ev­ery topic at this year’s BFA in­cluded the word “new,” ev­i­dence of an ex­cit­ing time with de­vel­op­ments in en­tre­pre­neur­ial ap­proaches and in­no­va­tion, es­pe­cially the in­ter­net+ and ad­vances in macro­eco­nomics. Al­phago’s vic­tory over Lee Se-dol turned out to be one of the buzzier top­ics at the Fo­rum.

Over the past two years, China’s eco­nomic “new nor­mal” has trig­gered doubt around the world. The global mar­ket has placed its fo­cus on China and the eco­nomic down­turn of 6 per­cent in growth pace: Global eco­nomic sec­tors that de­pend on China sud­denly lost their driv­ing force. The re­sult has been anx­i­ety in global mar­kets, par­tic­u­larly in the West.

Western coun­tries have been wor­ried about China’s long and sta­ble, yet speedy eco­nomic growth. Many an­a­lysts have ex­pressed hope to see China’s eco­nomic clout, which is re­vers­ing the global eco­nomic or­der, di­min­ish. How­ever, global mar­kets have come to rely on China’s rapid eco­nomic growth (which has con­trib­uted over 50 per­cent of global eco­nomic growth) even more after the global eco­nomic cri­sis spread from Amer­ica and Europe.

As a re­sult, China’s eco­nomic “new nor­mal” has be­come a con­tra­dic­tion be­tween do­mes­tic self-con­fi­dence and for­eign query, which as­sumes that China is de­clin­ing eco­nom­i­cally be­cause of volatil­ity in stock and for­eign cur­rency mar­kets. Ge­orge Soros haugh­tily short-sold the RMB only to lose, and Moody’s du­bi­ously down­graded China’s sovereign credit rat­ing.

After the lengthy eco­nomic re­cov­ery of the United States, the Fed­eral Re­serve dropped quan­ti­ta­tive eas­ing to raise in­ter­est rates, which both­ered the global mar­ket. To­day, Fed’s in­ter­est rate hikes have slowed.

Prior to this year’s NPC and CPPCC an­nual ses­sions, China was rocked by ex­tra­or­di­nary chaos in its stock and for­eign cur­rency mar­kets. The sit­u­a­tion wors­ened when the real es­tate mar­ket was struck by slug­gish­ness and “in­di­ges­tion.” Nev­er­the­less, Beijing sent the world an ex­plicit sig­nal dur­ing the G20 World Pol­icy Con­fer­ence and the Two Ses­sions that China can keep the RMB at its cur­rent value and main­tain sta­bil­ity of the stock mar­ket through sys­tem­atic re­form and well-or­ga­nized su­per­vi­sion.

Data shows that the stock mar­kets in Shang­hai and Shen­zhen have re­bounded from the down­turns. Of course, many mov­ing parts in­flu­ence these mar­kets, but over­all, they are set­tling down. The RMB, for in­stance, has achieved steady growth after im­ple­men­ta­tion of ex­change rate re­form in Au­gust 2015.

Stock and for­eign cur­rency are the most vis­i­ble in­di­ca­tors of the Chi­nese mar­ket. When they are chaotic, the “new nor­mal” is seen as a new cri­sis. When they are sta­ble, the global mar­ket quickly re­gains their faith in China’s econ­omy.

Do­mes­tic in­vestors look at real es­tate along with the rises and falls of the stock mar­ket. When the stock mar­ket is sta­ble, medium and smaller in­vestors are more con­fi­dent, in­spir­ing the for­ma­tion of rea­son­able re­form mea­sures by su­per­vi­sors of the cap­i­tal mar­ket, which can be ac­cel­er­ated at its con­ve­nience.

“Slug­gish­ness” in the first- and sec­ondtier ci­ties and stag­na­tion in the third- and fourth-tier ci­ties hap­pen si­mul­ta­ne­ously along with dif­fer­en­ti­a­tion of the real es­tate mar­ket. Along with ad­just­ment of poli­cies, at­ten­tion should be placed on the be­hav­ior of in­vestors, who of­ten make ir­ra­tional moves in hopes of quick pay­offs. A ma­jor con­cern for pol­icy mak­ers is pre­vent­ing such risky in­vest­ment through pol­icy guid­ance and mar­ket al­lo­ca­tion.

Re­form isn’t to blame for tough mar­ket is­sues dur­ing China’s struc­tural ad­just­ment to “new nor­mal.” Rather, these is­sues are the re­sult of ir­ra­tional in­vest­ing. The chal­lenge for pol­icy mak­ers is to get medium and small scale in­vestors who tend to­wards mar­ket spec­u­la­tion to in­vest more wisely.

The BFA hopes that elites from the po­lit­i­cal and com­mer­cial cir­cles around the world will build faith in China’s eco­nomic “new nor­mal.” It also aims to in­spire in­no­va­tion and orig­i­nal­ity to be deeply rooted in China and Asia and to breed new economies around the world and help them thrive on new plat­forms of in­ter­net+ and +in­ter­net, so that the economies of China, Asia, and the world can reach a new era.

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