CHINA’S GIFT TO THE WORLD The Chinese economy leveled off at 6.7 percent in 2016. chief economist at the Institute of International Trade and Investment in Japan, penned an oped in a Japanese language monthly publication, on China’s steady economic grow
The world economy has been sluggish since the global financial crisis broke out in 2008. Against this backdrop, however, the Chinese economy has maintained medium to high-speed growth, fueling the recovery of the global economy. Therefore, the international community has become increasingly concerned about the latest trends in the Chinese economy. This year’s sessions of the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), commonly called the Two Sessions, has attracted more and more international attention since they serve as a weather vane for the Chinese economy. As for the Two Sessions, I am particularly concerned about the development of the Chinese economy and plans for the Silk Road Economic Belt and 21st-Century Maritime Silk Road Initiative (Belt and Road Initiative).
Steady real economy
In 2016 China’s GDP grew by 6.7 percent, the lowest in recent years—the figure is slightly lower than 2015’s growth rate of 6.9 percent. However, we must evaluate these numbers in the right context.
First, I think the 6.7-percent growth rate is an accurate reflection of China’s real economy in 2016. The Chinese economy had maintained higher GDP growth in previous years, but that was partly due to the effect of some economic bubbles. For instance, to pursue high GDP growth rates, many local governments in China built large numbers of buildings, hoping to push up economic growth through real estate development. But if that industry becomes excessively heated as a result of massive investment, it will result in too many unsold buildings forming risk-laden economic bubbles. Chinese President Xi Jinping vowed to carry out supplyside structural reform at the 11th meeting of the Central Leading Group on Financial and Economic Affairs held on January 27, 2016. This indicates that China’s top leadership has recognized the risks behind economic bubbles, surplus capacity and an unreasonable industrial structure.
The GDP growth in 2016 was closely related to reforms on the supply side. Take the human body as a metaphor. Exercise can help an overweight person reduce excess fat and develop firm muscles. The Chinese economy is undergoing a similar fitness process. The supply-side reform is tasked with burning surplus capacity and economic bubbles as if they were excess fat. The 6.7-percent growth reflects solid improvement in the real economy following achievements made in the supply-side reform.
Second, the world GDP grew by around 3 percent in 2016, while China’s growth was more than double that figure. From that, one can conclude that the Chinese economy plays a powerful role in supporting global economic recovery.
President Xi said at the Central Economic Work Conference on December 16, 2016 that the supply-side structural reform will be intensified in 2017. Premier Li Keqiang’s Government Work Report delivered at this year’s Two Sessions also listed measures to bolster the reform.
Reforming the supply side is not just China’s task, but also a worldwide challenge. Whether