Source:Global Times Published: 2019/3/5 20:58:400
Illustration: Liu Rui/GT
By Global Times (6 March 2019) – China has lowered its economic growth target this year to between 6 and 6.5 percent, according to the Government Work Report Premier Li Keqiang delivered to the second session of the 13th National People’s Congress on Tuesday. What does the figure imply for Chinese and world economy? How should the world respond to China, the second biggest economy? The Global Times talked to two Chinese experts on these issues.
Bai Jie, managing director of the Research Center for Emerging Economies, Shandong University of Finance and Economics
The adjustment of China’s economic growth rate is based on sound judgment about the international and domestic economy. The world is undergoing unprecedented changes. The existing world order is being reshaped by the changes in China-US relations. The divergences between the US and Europe, the split within Europe, geopolitics and populism have let headwinds buffet the world economy, which in turn affects China’s economic growth. China-US relationship is particularly worrying, as the US’ China policy from engagement to containment will impede the Chinese economy for a long time.
At the domestic level, 2019 will be the year of transformation for China’s economic structure. Pressured by the re-industrialization of developed countries and other developing countries striving to become new “world factories,” as well as an aging society, the labor-intensive trade model that China used to rely on cannot sustain. Therefore, China is pushing forward supply-side structural reforms, developing consumption and optimizing its industrial structure. All such adjustments will help cure economic woes. But reforms need cost and time. Within the reform period, slowing economic growth is normal.
The international community should have confidence in the long-term growth of the Chinese economy and need not be too concerned about short-term fluctuations. During the ongoing two sessions, China also proposed macroeconomic policy changes such as tax cuts and lower real interest rates. The combination of both long-term and short-term policies will lay the foundation for steady and speedy growth.
An IMF’s World Economic Outlook report released in February said that a slowing down Chinese economy is of particular concern for world growth. As China is the world’s second largest economy, its economic slowdown will affect the world, through international trade, investment and currency rates. But the impact will be limited. Compared with extensive high-speed growth, rational qualitative growth of China is more preferred by other countries.
Wan Jun, research fellow at the Institute of World Economics and Politics, Chinese Academy of Social Sciences
China’s GDP growth target is set based on the realities of the country. China’s economy confronts pressures from both home and abroad.
Internationally, in recent years, de-globalization has negatively influenced global economic growth, putting pressure on the Chinese economy.
Domestically, China is under economic transformation, shifting from investment-driven to innovation-driven growth. The economic structural transformation will impact economic growth to some extent.
Compared with 10 years ago, China’s dependence on exports has dropped remarkably. According to the World Bank, exports of goods and services as percent of GDP declined from 36.04 percent in 2006 to 19.76 percent in 2017.
China’s economy relies heavily on domestic demand. According to People’s Daily, based on a special session of the 2018 China Development Forum in September 2018, “Consumption has grown into China’s largest power for growth, making up nearly 80 percent of the country’s GDP growth.”
However, imports and exports are still important to China’s economy, though their significance has fallen. Therefore, the trade war with US has affected China’s economy. But the impact is manageable as a result of China’s lower reliance on exports.
The West has been hyping up the so-called Chinese economic collapse for years. We may see a fresh round of discussion on this topic after China lowered its GDP growth target. From the development of other economies, such as Japan and the “Four Asian Tigers,” one can see that high growth is followed by a tapering down.
The size of China’s economy is already huge. If it continues at a speed of over 8 percent, it would produce huge demand for resources, which may trigger severe problems.
China’s economic slowdown is consistent with the law of economic development. Actually, GDP growth of 6 to 6.5 percent is still eye-catching.
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