Ex­ceed­ing Ex­pec­ta­tions

Vig­or­ous con­sump­tion leaves china con­fi­dent of an­nual growth tar­get de­spite trade fric­tion un­cer­tain­ties

ChinAfrica - - KEYWORDS - By Zhou Xiaoyan

As the es­ca­lat­ing trade dis­pute be­tween China and the United States casts a shadow over the world’s two largest economies and the global econ­omy at large, the much-an­tic­i­pated Chi­nese eco­nomic fig­ures for the first half of the year of­fer some cer­tainty of China’s eco­nomic re­silience and sus­tain­abil­ity, amid mount­ing in­sta­bil­ity world­wide.

The Chi­nese econ­omy ex­panded 6.8 per­cent year on year in the first half of 2018, ex­ceed­ing mar­ket ex­pec­ta­tions. The rate was 6.7 per­cent for the sec­ond quar­ter, edg­ing down 0.1 per­cent­age point from the pre­vi­ous quar­ter, with the growth rate within the 6.7-6.9-per­cent range for 12 con­sec­u­tive quar­ters, ac­cord­ing to data re­leased by the Na­tional Bureau of Sta­tis­tics (NBS) on July 16. NBS spokesper­son Mao Shengy­ong said the data showed the coun­try’s eco­nomic growth re­mained sta­ble with good mo­men­tum.

“Pos­i­tive fac­tors un­der­pin­ning high-qual­ity growth are ac­cu­mu­lat­ing, lay­ing a solid foun­da­tion for achiev­ing the growth tar­get for the whole year,” said Mao. China has set its an­nual GDP growth tar­get at around 6.5 per­cent for 2018.

How­ever, ex­ter­nal pres­sures are mount­ing, and do­mes­tic struc­tural ad­just­ment has now reached a crit­i­cal stage. China should ac­tively boost do­mes­tic de­mand, in­vig­o­rate the real econ­omy, cope with ex­ter­nal chal­lenges and pre­vent and defuse risks, said Mao. Look­ing ahead, the Chi­nese econ­omy will con­tinue the trend of seek­ing progress amid sta­bil­ity, with the tar­get of 6.5 per­cent for 2018 as a whole achiev­able, Xu Hong­cai, Deputy Chief Econ­o­mist of China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes, told Chi­nafrica.

“The growth rate is likely to come in at 6.7 per­cent for 2018, 6.6 per­cent for 2019 and 6.5 per­cent for 2020,” said Xu, adding that at this rate, the goal of dou­bling China’s econ­omy and the per-capita in­come of its res­i­dents from 2010 to 2020 will be ac­com­plished.

Con­sump­tion driven

Ac­cord­ing to Mao, dur­ing the first six months of 2018, an op­ti­mized eco­nomic struc­ture has been re­flected in a stronger ser­vice sec­tor, the ac­cel­er­a­tion of in­dus­trial up­grad­ing, progress in in­no­va­tion and green de­vel­op­ment, and most im­por­tantly ro­bust con­sump­tion.

The job mar­ket was gen­er­ally sta­ble, with the sur­veyed ur­ban unem­ploy­ment rate stay­ing at 4.8 per­cent through­out June and May, the low­est since 2016. In the first five months, some 6.13 mil­lion ur­ban jobs were added, sur­pass­ing the fig­ure for the same pe­riod in 2017 and mak­ing achiev­able this year’s tar­get of cre­at­ing 13 mil­lion jobs.

In re­cent years, the up­grad­ing of China’s con­sump­tion has been ac­cel­er­at­ing. Growth in the re­tail sale of con­sumer goods has sur­passed that of fixed as­sets in­vest­ment for 26 con­sec­u­tive months, ev­i­dence of the in­creas­ing role of con­sump­tion in the Chi­nese econ­omy. Do­mes­tic con­sump­tion has been the bal­last for growth, its con­tri­bu­tion to GDP growth as high as 78.5 per­cent in the first half of 2018, up 14.2 per­cent­age points from a year ago, ac­cord­ing to the NBS.

Dur­ing this pe­riod, the re­tail sale of con­sumer goods in­creased by 9.4 per­cent year on year, with on­line re­tail sales surg­ing by more than 30 per­cent.

“Judg­ing from ma­jor eco­nomic in­di­ca­tors, do­mes­tic de­mand has be­come a de­ci­sive force of growth in China,” said Mao, pre­dict­ing that the sta­ble and sus­tained growth of con­sump­tion will con­tinue in the sec­ond half of the year.

Sev­eral fac­tors will sup­port steady con­sump­tion growth in China. “Res­i­den­tial in­come has been in­creas­ing more quickly and deeper pock­ets fa­cil­i­tate more spend­ing,” said Mao. “More im­por­tantly, the Chi­nese econ­omy has de­vel­oped to the stage that con­sump­tion up­grad­ing will only speed up, not slow down.”

Trade un­cer­tain­ties

China’s trade spat with the United States has raised un­cer­tainty about the coun­try’s eco­nomic out­look and roiled its fi­nan­cial mar­kets in re­cent weeks.

The United States be­gan im­pos­ing ad­di­tional 25-per­cent tar­iffs on $34 bil­lion worth of Chi­nese prod­ucts on June 6, ig­nit­ing the largest trade dis­pute in eco­nomic his­tory. China was forced to re­spond in kind, im­pos­ing the same tar­iffs on an equal amount of U.S. prod­ucts.

Ac­cord­ing to the World Eco­nomic Out­look, a re­port re­leased by the IMF on July 16, a global growth rate of just 3.9 per­cent is pre­dicted for this year and the next. “But the risk that cur­rent trade ten­sions es­ca­late fur­ther with ad­verse ef­fects on con­fi­dence, as­set prices, and in­vest­ment is the great­est near-term threat to global growth,” an IMF state­ment said.

“Af­ter nearly 10 years of ad­just­ment, the world econ­omy is fi­nally start­ing to bot­tom out, en­ter­ing a phase of re­cov­ery and ro­bust growth,” said Chen Wen­ling, Chief Econ­o­mist of China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes. “How­ever, es­ca­lat­ing trade ten­sions could im­pede re­cov­ery, with U.S. uni­lat­eral ac­tion de­stroy­ing in­ter­na­tional trad­ing rules, global in­dus­trial and value chains, sys­tems of global gov­er­nance and Sino-u.s. re­la­tions.”

In re­sponse to a ques­tion on a po­ten­tial down­turn brought about by China-u.s. trade fric­tions, Yan Pengcheng, Spokesper­son for the Na­tional De­vel­op­ment and Re­form Com­mis­sion, said that the Chi­nese econ­omy is re­silient enough to cope with the shock of un­cer­tainty in the world econ­omy.

“First, China’s eco­nomic growth has shifted from an over­re­liance on in­vest­ment and ex­ports to re­ly­ing pri­mar­ily on con­sump­tion and ser­vices. Mean­while, China has suf­fi­cient room for pol­icy changes to cope with the fall­out of events in the world econ­omy - the fis­cal deficit and govern­ment debt ra­tio are rel­a­tively low, the cap­i­tal ad­e­quacy ra­tio at com­mer­cial banks is high and cor­po­rate debt ra­tio is in de­cline. China also has rich ex­pe­ri­ence in deal­ing with com­pli­cated sit­u­a­tions,” Yan said at a press brief­ing on July 17.

Ex­perts say that the rapid growth of im­ports is set to con­tinue amid the wider push to open up. The Chi­nese Govern­ment has re­it­er­ated on many oc­ca­sions that China does not know­ingly pur­sue a trade sur­plus and has is­sued an ar­ray of poli­cies to in­crease im­ports in an at­tempt to pro­mote more bal­anced trade, sat­isfy peo­ple’s de­mand for con­sump­tion and fa­cil­i­tate eco­nomic struc­tural up­grad­ing.

Fol­low­ing China’s push to fur­ther re­form and open­ing up, cut red tape and im­ple­ment a na­tion­wide neg­a­tive list for mar­ket ac­cess of for­eign in­vest­ment, a grow­ing num­ber of for­eign firms have de­cided to in­crease their pres­ence in the Chi­nese mar­ket as a re­sult of im­proved busi­ness en­vi­ron­ment.

On July 10, Tesla, the U.s.-based elec­tric Sedan and SUV man­u­fac­turer, signed an agree­ment with Shang­hai Mu­nic­i­pal Govern­ment for its first over­seas plant. The fac­tory, with a planned an­nual pro­duc­tion ca­pac­ity of 500,000 elec­tric cars, will be the largest for­eign-in­vested man­u­fac­tur­ing project in the city’s his­tory.

“The es­ca­la­tion of China-u.s. trade ten­sions is not in line with the in­ter­ests of peo­ple in ei­ther coun­try. Yet the im­pact should not be over­stated be­cause fun­da­men­tally, the Chi­nese econ­omy is driven by do­mes­tic de­mand and its real econ­omy,” said Xu.

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niyan­[email protected]­nafrica.cn

Af­ter nearly 10 years of ad­just­ment, the world econ­omy is fi­nally start­ing to bot­tom out, en­ter­ing a phase of re­cov­ery and ro­bust growth. CHEN WEN­LING Chief Econ­o­mist of China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes

Cus­tomers queue at the check­out of the Sanya In­ter­na­tional Duty-free Com­plex in south China’s Hainan Prov­ince

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