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Liu Zhiqin: China’s transition can keep global recovery on track

2016-02-19

By Liu Zhiqin    Source: Global Times    Published: 2016-2-18

 

US Federal Reserve chief Janet Yellen said earlier this month that the persistent global market turbulence would impact the US economy and that there may be higher risks from China.


Meanwhile, a survey released at the World Economic Forum held in Davos last month showed that only 27 percent of participants at the forum believed the global economy`s growth would continue, 10 percent less than in 2015.  


That showed the pessimistic view about the global economy in 2016 has become a mainstream opinion among economic experts, research fellows and officials in various countries.


Why are people so pessimistic about economic growth in 2016? It seems the whole world is worried about losing its growth engine. Over the past three decades, China has played a role as a "hard engine" for the global economy through buying goods and raw materials from all over world. Countries that have abundant natural resources were keen to export their products to China, and this helped fuel global growth.  


However, China`s economy has slowed down and no other country - not even India, whose economy grew by 7.9 percent in 2015 - is capable of replacing China as the key engine of the world economy in a short time.  


But China is still leading the way in economic performance in the world since the global financial crisis in 2008, and has been trying to save the world from falling into another recession. In 2015, China`s GDP grew 6.9 percent year-on-year, one of the fastest rates in the world, contributing 25 percent to world economic growth. The average GDP per capita in 10 municipalities and provinces exceeded $10,000, which showed significant progress in China`s modern history. This will help China realize its goal to become a well-off society by 2020, a key part of the Chinese Dream.  


Certainly China has challenges and many issues to be resolved such as urbanization, healthcare reform, and creating jobs, especially in 2016. And China is also trying hard to find the right engines for its own growth.


The central government has outlined five key tasks for this year`s economic development: reducing overcapacity, reducing inventories of unsold property, deleveraging, lowering corporate costs and strengthening the economy`s weak links. If these tasks can be achieved, it will help create new momentum for the country`s economic growth. Meanwhile, at the World Economic Forum in Davos, the so-called "4th industrial revolution" was also discussed. The 4th industrial revolution will be characterized by robots, 3D technology and other newly developed technologies.


This revolution should also include China`s high-speed railway technology. The whole world will benefit from the innovations made by Chinese high-speed railways and China will continue to play a major role in facilitating the progress of the 4th industrial revolution.


In China, we should focus our capital and efforts on developing the "intelligent industry" that will become our main engine to lead our economy forward. China should shift its role as a "hard engine" of consumption of resources to a "soft engine" by providing various technologies and smart know-how to meet the global demand.


China has to innovate and create new ideas and technologies to boost its own economy and world growth as well.  


In this respect, the world should rest assured that China will remain a powerful engine for global economic recovery in the next five years.


With the "Belt and Road" concept, China also has the chance to boost investment in other countries.


In this sense, we have no reason to be pessimistic. The conditions are sound enough to perceive a brighter future for China.


The author is a senior fellow at the Chongyang Institute for Financial Studies at the Renmin University of China.

Key Words: World economy   China   engine  

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