China transition deserves global patience
"Patience is bitter, but its fruit is sweet." The adage from Jean-Jacques Rousseau should be made familiar to those impatient with China's economic transition.
Pessimism may prevail as China's growth eases, but rewards will go to those with confidence and patience. Rapid growth over the past few decades has catapulted China into the position of being the world's secondlargest economy, showering benefits on global investors as well as the country's own people.
But the investment-led model that propelled the development has reached its limits. A multitude of problems -- high debt levels, industrial overcapacity and environmental degradation at home and subdued global demand -- mean an imperative of bringing the economy onto a more sustainable path. The answer is transforming the economy into one that draws strength from consumption, services and innovation.
Such a transition is bound to be painful and protracted. As China trades quantity for quality, double-digit growth of the economy would not be easy. Worries about China's economic future have always been a facile explanation for the world's hardships, including the global market rout last week. It would be more advisable for people to stop playing the blame game and take time to see the Chinese economy in perspective.
Firstly, China has been proactively retooling its economy, before too late. The country is trying to pull off a managed slowdown -- a rebalancing act that requires wisdom, vision and courage. The reform strategies and measures crafted by policymakers so far indicate that China is progressing in the right direction.
The country is not content with being the world's factory and is toiling for industrial upgrades; the market is promised a decisive role; unprofitable "zombie" enterprises have been ordered to make earlier exits; carbon taxes have been introduced to encourage clean energy technologies.
Secondly, China's growth is still relatively fast. The newly-added economic output in 2015 was more than the GDP of Sweden or Argentina. IMF data showed China contributed 35 percent of the world's economic growth in the past five years and the figure will stay around 30 percent in the years leading to 2020. Thirdly, there have been signs that the efforts for more sustainable growth are paying off.
In 2015, consumption contributed 66.4 percent of China's GDP, up 15.4 percentage points from 2014. Hi-tech industry developed much faster than the industrial sector as a whole and energy consumption per unit of GDP is falling. The momentum is marked. During the Spring Festival holiday week, for example, cinemas took 3 billion yuan ($460 million), up 67 percent from last year.
Official data on Thursday also offered relief. Consumer inflation picked up in January and the contraction in producer prices eased. National lawmakers will in March convene to discuss issues that have significant bearing on economy and society, with the 13th Five-Year Plan to 2020 being unveiled. As China stays committed to the painful but necessary reforms, a more robust economy is likely within reach. That merits patience.