Source: Global Times Published: 2018-8-17
Recent external pressures, a general global trade malaise and bold new domestic reforms are putting some extraordinary pressures on China's economy, but economists say positive indicators far outweigh the negative ones and predictions of doom and gloom will soon be prove wrong.
Analysts say people and prognosticators should be more prudent and optimistic as the economy remains strong and resilient.
"Every country's economy has cycles and can't continuously grow at a fast rate. The outside world shouldn't be pessimistic about China's economic development just because growth is slower than during the miracle China had achieved over the past 30 years," said Wan Zhe, chief economist of the International Cooperation Center of the National Development and Reform Commission.
Western media reports predicting bad outcomes for China's economy have ramped up recently. Even the Seattle Times reported on Tuesday that the China-US trade spat has rattled China's economy and if the trade war escalates, "some worry that the Chinese public's faith in the economy could be shaken."
Indeed, China's economy has encountered some new challenges that have produced some negative statistics. The A-share market has slumped about 25 percent this year as the looming trade war saps investor confidence. The value of the yuan has declined nearly 6 percent in 2018 as the US dollar continues to suck cash out of the economies of many developing nations and rising real estate prices are putting pressure on reforms aimed at increasing domestic consumption.
All of the issues have unique root causes that have little to do with the foundation that underpins China's maturing economy.
"As the world's second-largest economy undergoes structural transformation, difficulties can be expected. The way ahead will be increasingly bumpy because just like an adult, things get more complex," Wan told the Global Times on Thursday, stressing "market fluctuations shouldn't be politicized."
"China is growing stronger amid these difficulties… China's economy will not be stricken by one external shock," Cong Liang, spokesperson for the National Development and Reform Commission, the country's top economic planner, said at a press briefing on Wednesday.
In the first half of 2018, China's GDP grew 6.8 percent year-on-year, staying within the 6.7 to 6.9 percent range for consecutive 12 quarters.
Despite many indicators that show China's economy continues to be one of the world best performer, The New York Times said in an editorial on Wednesday that "China also faces a serious risk of capital flight" and the fate of the world depends on how China deal with this.
Wang Tao, head of China economic research at UBS, told the Global Times that to avoid large-scale capital flight out of China, the People's Bank of China will likely stabilize the exchange rate as necessary. Wang said that the yuan is likely to stand at around 7 to the US dollar by the end of 2018.
To maintain the stable and sound development of China's economy, Cong said efforts are needed in six areas, involving active fiscal policy, deepening supply-side structural reform, cautious deleveraging and promoting reform and opening-up.
To enhance China's long-term competitiveness, authorities should shore up confidence, especially that of enterprises, Hua Changchun, chief economist at Guotai Junan Securities, told the Global Times.
"On one hand, corporation tax should be further reduced and State-owned enterprise reform should be strictly carried out. On the other hand, the government should provide legal services to help domestic companies pull through any external troubles they might face over the next two to three years," said Hua.
At this key point in China's market-oriented reforms, how to deepen reform, how to release consumption potential and how to nurture new talent are crucial questions that need to be resolved, Wan said.
"We should be neither too pessimistic nor too optimistic about the economy," Wan said.
Despite downward pressure, China's economic development has been largely steady so far this year, and this year's GDP target can be achieved, Wang said.
"The Chinese government will not likely adopt strong stimulation policies this year, unless a full-scale trade war breaks out," Wang noted.
China's economy is vast and together with the country's huge consumption potential, the economy will not collapse, Hua stressed.
Wan Zhe is a visiting fellow of Chongyang Institute for Financial Studies at Renmin University of China.