Resilient economy holds lots of promise
DEC . 09 2021
Peking University, December 9, 2021: Just short of entering the third year of the COVID-19 pandemic, the world economy is still in a precarious state. The US economy is unlikely to achieve its promised growth rate of 7-8 percent, and Europe and other regions face obstacles in their way to full recovery due to emergence new variants waves of the novel coronavirus.
Notwithstanding all these uncertainties, the Chinese economy has continued its robust recovery. In the first three quarters of this year, China's economy grew 9.8 percent year-on-year. And the expected 4-5 percent growth in the last quarter will take the growth rate for the whole of 2021 to 8.35-8.5 percent. This is a minor "growth miracle".
Besides, unlike many other countries, China does not face high inflation. Thanks to China's humungous manufacturing capacity, high commodity prices have not been translated into high consumer prices. Because of the abrupt fall in temperatures in the southern parts of China, prices of vegetables have risen modestly, but the overall CPI has never risen above 2 percent in any month of this year.
Indeed, there was a short period of power shortage. But the issue was promptly addressed by the government. As a result, power prices have not risen significantly. All this makes the talk of stagflation not warranted.
China still leads the world in terms of economic recovery, beating market pundits' predictions. However, this is not the first time the experts have been wrong about the Chinese economy. There had been much talk of the major economies decoupling from the Chinese economy, with predications that many companies were about to move out of China.
But no such thing happened, not least because the economies of China and other countries are too intricately linked to be decoupled. And China's performance over the last one and a half years has shown that the appropriate place for such talks and claims is the trash bin.
Also, China was one of the few countries whose exports grew in 2020. In fact, with its export growth reaching the levels achieved during the first decade of this century, China has continued to belie the pessimism. If anything, the world has become more dependent on China. It can be attributed to China's focus on expanding and improving the manufacturing sector, which in turn has increased China's manufacturing value added to 29.2 percent of the global total, close to the combined total of the next three countries－the United States, Japan and Germany.
The pandemic has accelerated China's bid to catch up with the US. Last year, the gap between the US and Chinese economies narrowed by 3 percent, which means China's GDP today is about 71 percent that of the US. The gap is expected to be narrowed by another 3 percent this year.
China attracted $177 billion in foreign direct investment, more than one-fifth of the global total, last year, according to the Organization for Economic Co-operation and Development.
Moreover, China has made remarkable achievements in the field of alternative energy and electric vehicles. For example, it installed 17.9 GW of solar power in the first seven months of this year, and is expected to contribute to one-fifth of the global growth in solar power generation for the whole of this year.
As for electric vehicle sales in the first three quarters, they reached 1.76 million units, 58.7 percent of the global total (up from 40 percent in 2020), and more than six times that of the United States. Even in terms of emissions reduction, China leads all other countries.
Given these facts, China is unlikely to lose its growth momentum in 2022. And even though export growth may decelerate, domestic demand will pick up.
Consumption indeed has been a drag on the Chinese recovery, despite China largely containing the pandemic. So given the expanding vaccination coverage, China is expected to adopt more accommodating pandemic-control measures, and stimulus policies to boost domestic consumption.
China does not lack supply capacity. It's the static demand that is obstructing faster recovery, and the government has realized this. Hence, it is expected to maintain proactive fiscal policy and accommodating monetary policy.
Furthermore, the government may consider increasing support to the commercial housing market to help meet homebuyers' needs and promote the healthy development of the real estate sector. The housing market has been one of the strongest sectors in China's recovery, and the move will help it maintain healthy and sustainable growth.
Therefore the priority among the targets of 2022 should be to stabilize growth next year. The Chinese economy has undergone deep restructuring over the last decade, which has eliminated up most of the zombie enterprises and drastically changed the economic structure, making it more innovation-driven. And the central theme guiding all those changes has been the promotion of high-quality development－development based on innovation and technological progress.
Next year may see a new growth cycle, but for domestic and foreign investors alike, China will remain one of the most promising destinations for long-term investment.
The views don't necessarily reflect those of China Daily.
The author is a liberal arts chair professor and the dean of the National School of Development, Peking University.