Zhou Xiaoming: Doomsayers should think twice before writing off China’s economy
November 03 , 2022■ China’s economy faces serious short-run challenges but is still in a better position than many to weather global economic headwinds
■ Strong exports, consistent leadership, pro-growth policies, a focus on innovation and continued foreign investment bode well for long-term prospects
By Zhou Xiaoming, a senior research fellow at the Center for China and Globalization(CCG) and former deputy permanent representative of China’s Permanent Mission to the United Nations Office in Geneva.
Over the past three decades, there has been no shortage of doomsayers on China. I met one at a seminar on China’s 18th party congress at Oxford University in 2013, who maintained that the congress was a “desperate” effort by the Communist Party to save itself from demise.
Looking at Western mainstream media over the past week, I have been struck by the same pessimistic tone – though the focus has shifted to the Chinese economy. Such is its “fragile” state, analysts assert, that China has few options to revitalise growth and no hope of catching up with the US in our lifetime.
True, China’s economic growth slowed to 3 per cent in the first nine months this year, well below its 5.5 per cent target, and its lowest over four decades. But it would be rash to predicate China’s long-term economic outlook on the performance of just a few quarters, or even a few years. That China’s economy expanded as it did reflects its dynamism in view of the Covid-19 lockdowns and other restrictions.
When these measures end, suppressed demand – and supply – will surge, giving the economy a strong boost. China would then return to normal growth.
Already, the economy is gaining momentum as restrictions ease. International flights in and out of China are set to double. Entry rules have been relaxed for foreigners such as businessmen and students.
With a refined precision targeting strategy, fewer people are likely to be affected by control measures. Locking down an entire city, as happened with Shanghai, is a thing of the past.
China’s economy faces serious short-run challenges but is still in a better position than many to weather global economic headwinds. While the European Union and United States struggle to contain record inflation surges, China, with an inflation rate below its 3 per cent target, has more room to manoeuvre.
And compared with most developed countries, which have practically exhausted their tools, China still has considerable fiscal and monetary options.
Furthermore, China’s export machine is running well. During the pandemic years, China steadily increased its share in global exports. The first three quarters this year have seen China’s exports soar to 17.67 trillion yuan (US$2.4 trillion), up 13.8 per cent over the same period in 2021, itself a record year.
While other export powerhouses such as Germany, Japan and South Korea have seen their trade surpluses disappear, China’s January-September trade surplus hit an all-time high of 4.23 trillion yuan, up 53.7 per cent. All this points to China’s improved competitiveness.
A strong and effective leadership is critical to economic growth in any country, especially during testing times. Despite criticism in the West, the re-election of Xi Jinping will ensure China continues its modernisation journey with stability and predictability.
That is unlike in Britain, where four-month-old babies have seen three prime ministers in their short lifetimes, or in the US, where a change in the White House occupancy could mean an overnight ditching of national policies.
The Chinese government continues to be committed to the decades-long policy of reform and opening up, and has reaffirmed that development is the top priority. Contrary to the claim that China is turning away from market forces, its leadership is working hard to give full play to the market.
Pro-growth policies and measures are rolling out at a surprising speed. Just three days after the 20th party congress wound up, the government announced a slew of measures to lure foreign investors. A day later, the State Council announced more policy support for the private sector. These, and many other measures to come, will sustain growth.
China still has a huge growth potential, given its domestic market of more than 1.4 billion. As a percentage of its gross domestic product, consumption still accounts for only about half, well below the over 70 per cent seen in developed economies. To boost this, China continues to work on developing a fully integrated and well-functioning domestic market. And multinationals are clearly excited about the long-term prospects.
Foreign direct investment in the first nine months of this year jumped by 15.6 per cent to more than 1 trillion yuan, presaging another record year. BMW’s decision to relocate some of its Mini production from Oxford to China, German chemicals giant BASF’s €10 billion (US$9.9 billion) investment in a mega chemical complex in southern China’s Zhanjiang, and Volkswagen’s €2.4 billion investment in a joint venture with China’s Horizon Robotics all testify to their belief in China’s long-term economic prospects.
China’s strategy of focusing on innovation also appears to be working. In clean-energy vehicles, for instance, China has become the world’s largest maker and market in just one decade.
It is making inroads in countries traditionally considered car manufacturing powerhouses, overtaking Germany as the world’s second largest car exporter, just behind Japan. As China’s economic driver shifts increasingly to innovation, the world’s second largest economy will move up the value ladder, enhancing its economic resilience and competitiveness.
China has set an ambitious goal of achieving a per capita income on a par with that of a medium-developed country by 2035. This means doubling its 2020 GDP, which requires an annual growth of 4 per cent. Chinese economists agree the goal is highly likely to be achieved.
History has repeatedly proven doomsayers on China wrong. Looking back – and into the future, the Oxford professor may wish to change his point of view; it’s not wise to bet against China.
From SCMP， 2022-11-3
