It’s always unwise to bet against Chinese economy

The Chinese economy’s resilience, reflected by such factors as stable GDP growth, mild consumer inflation, increasing corporate profits and rising household incomes this year, will disappoint those doomsayers that have been consistently short on the world’s second-largest economy for its high debt levels and new uncertainties as a result of its trade disputes with the United States. As Yi Gang, governor of the central bank, said at an academic symposium over the weekend, China is well on course to achieve its preset GDP growth target of around 6.5 percent for the year, and it could possibly be higher; since economic indicators, such as the consumer price index, trade balance and consumption, show that the economy’s fundamentals remain stable and that it is becoming more healthy with domestic demand becoming a more important driving force for growth.

China has also managed to keep its overall leverage levels under control as its debt levels have stabilized after increasing for many years in the post-crisis era, as shown by the research of some academic institutions.

Stable growth plus less financial vulnerability mean the country has the capability to cope with the uncertainties and ramifications of the US-initiated trade disputes.

The impact of the trade tensions on China’s economic soundness is great, as Yi admitted, but it will only make it more difficult for the Chinese economy to regain its steam, not impossible. The Chinese economy has been on the downward cycle since 2007, and policymakers have reached a consensus that growth will remain at relatively low levels for quite a long time in the so-called L-shaped evolution.

However, one should not forget that China’s economic expansion over the past 40 years has never been smooth. It has undergone frequent ups and downs, and each time it has faced obstacles, it has managed to overcome them through economic restructuring and policy innovations.

China is a developing country that started to shake off the planned economy only 40 years ago; its economic management is far from flawless. But its resolve and ability to make reasonable adjustments should not be underestimated.

As Yi said, the country will stick to its own agenda of accelerating reform and opening-up, strengthening intellectual property rights protection and creating a level playing field for all types of enterprises. Through those measures, it will become more efficient, competitive and accommodative, which will benefit itself and the world economy as a whole.