The myth vs reality of China’s economy: It is not in free fall

Development is now the biggest shared goal of China and India. China has put forward the goal of building China into a great modern socialist country in all respects through the middle of this century.
THE INDIAN EXPRESS |
Published October 30, 2024

Instead, it is the primary contributor to global growth. Decoupling from China could mean decoupling from opportunities

Recently, China reported third-quarter GDP growth of 4.6 per cent year- on- year. Some Indian media outlets ran the headline “China’s economy in free fall,” while others questioned whether China could achieve its annual growth target of 5 percent. Some even advocated “decoupling and de-risking” from China. How can we view the Chinese economy in a comprehensive, objective, and rational manner? I would like to share my personal observations and reflections with Indian friends.

First, China’s economy is not in free fall, and will not be in free fall. A volatile external environment, coupled with internal economic restructuring and short-term natural disasters, has led to a slowdown in China’s GDP growth in the third quarter. Nevertheless, from a long-term perspective, the quarter-on-quarter GDP growth rate has been up for eight consecutive quarters. In the first nine months of 2024, China’s GDP grew by 4.8 per cent, outpacing many other major economies. Furthermore, the development of the high-tech manufacturing industry demonstrates the strong indigenous power of China’s high-quality economy. In the first three quarters of this year, the added value of high-tech manufacturing above the designated size and investment in high-tech industries increased by 9.1 per cent and 10 per cent respectively. The output of green industries, represented by the “new three” items, electric vehicles, lithium-ion batteries, and photovoltaic products, maintained double-digit growth. These indicate that the quality of China’s economy has steadily improved.

Secondly, China is confident of realising its 2024 targets. The Chinese government recently launched a new stimulus package whose breadth, depth and intensity are unprecedented. On the one hand, concrete measures have been introduced to boost the stock market and real estate market and support small and medium-sized enterprises. This will stimulate consumption, improve people’s livelihood and promote residents’ asset status. On the other hand, market barriers are to be reduced. The burden on enterprises and local governments will also be relaxed. As a result, retail sales, industrial production and fixed asset investment figures improved moderately in September. During the National Day holiday, China recorded 765 million domestic tourist trips, and new home transactions doubled year-on-year. Brokerages such as JPMorgan, Goldman Sachs and Nomura have raised China’s GDP growth estimates for 2024.

Last but not least, China is by no means a “risk”. Instead, the Chinese economy is still the primary engine of global growth, contributing more than 30 per cent to the world economy. Decoupling from China would mean decoupling from opportunities, from the future and in a sense, even from the world. In fact, international investors have already voted with their feet. In the first half of this year, 26,870 new foreign-invested companies were set up in China, up by 14.2 per cent. Foreign investment in actual use reached nearly 500 billion yuan ($69.8 billion), a relatively high level over the past decade. Tesla is building another factory in Shanghai, and it took only a month to negotiate and conclude the deal. Apple has established R&D centres in Beijing, Shanghai, Shenzhen and Suzhou, and doubled the number of its R&D staff in China over the past five years. China’s visa-free policies have attracted a good number of foreign travellers. I am glad to see some Indian vloggers tasting Chinese delicacies, visiting the night market and riding the high-speed rail. They have presented an open, safe, vibrant and friendly China through their lenses.

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SOURCE: www.indianaexpress.com

RELATED: China considers over $1.4 trillion in extra debt over next few years


A person sits on a bench near Beijing’s Central Business District (CBD), China July 14, 2024. REUTERS/Tingshu Wang/File Photo
REUTERS |
Published October 29, 2024

China is considering approving next week the issuance of over 10 trillion yuan ($1.4 trillion) in extra debt in the next few years to revive its fragile economy, a fiscal package which is expected to be further bolstered if Donald Trump wins the U.S. election, said two sources with knowledge of the matter.

China’s top legislative body, the Standing Committee of the National People’s Congress (NPC), is looking to approve the fresh fiscal package, including 6 trillion yuan which would partly be raised via special sovereign bonds, on the last day of a meeting to be held from Nov. 4-8, said the sources.

The 6-trillion-yuan worth of debt would be raised over three years including 2024, said the sources, adding the proceeds would primarily be used to help local governments address off-the-books debt risks.

The planned total amount, to be raised by issuing both special treasury and local government bonds, equates to over 8% of the output of the world’s second-largest economy, which has been hit hard by a protracted property sector crisis and ballooning debt of local governments.

Reuters is confirming for the first time that the Chinese authorities are contemplating approving the 10-trillion-yuan stimulus package, an amount that financial analysts have said in recent weeks they expect Beijing to consider.

 

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SOURCE: www.reuters.com