China’s contribution to the world economy can be analyzed from three perspectives. First, China has become the world’s second-largest economy and its GDP accounted for 15.5 percent of the global total in 2015, according to the IMF. It has become a major engine propelling the growth of the world economy and global economic recovery. Second, China’s poverty reduction greatly contributes to the global efforts to reduce poverty. From 1990 to 2015, the number of poverty-stricken people worldwide decreased to 836 million from 1.9 billion and China accounted for more than 70 percent of the reduction. Third, China’s economic links with the world have helped stabilize the world economy and contributed to the post-crisis recovery of the global economic and trade system. China’s trade in goods has topped the world for three consecutive years and it is second in terms of trade in services. Although its foreign trade fell due to the decline in global trade, the decrease is significantly less severe compared with developed economies. In 2015, its imports of goods helped create 20 million jobs globally. Its outbound direct investment, which is expected to exceed $500 billion in the 2016-20 period, will help boost global economic growth. More importantly, China’s success in maintaining stable growth provides a new “China model” for other countries to learn from.
—— Wan Xiangyu
Researcher, Institute of Quantitative and Technical Economics
the Chinese Academy of Social Sciences
China’s economy has not only outperformed other economies, China’s economic strategy has also “out thought” Western economic models. From 1978 onward China ranked first among all economies in terms of economic growth. This growth necessarily shows that China’s economic model not only produced more rapid growth than developed economies but also capitalist economies at the same stage of economic development. The degree to which economies influenced by the “China development model” outgrew the world average was huge. From 1978 onward China’s rate of growth was almost six times the world average. Since 1989 China again grew almost six times as fast as the world average. In social policy, China undertook massive and conscious programs deliberately aimed at eradicating poverty－these are to be completed in the 13th Five-Year Plan by 2020 by lifting the remaining 70 million people out of poverty. It deliberately promotes development through urbanization as a way of moving the population into higher productivity economic sectors; it deliberately seeks to narrow the income gap between rural and urban areas; it does not rely exclusively on “the market” but deliberately uses State infrastructure spending to raise the economic level of its less developed inland provinces; and China has legally guaranteed private property but a key economic role was assigned to the State sector. The facts of world economic development show that China’s development policies were the most successful in producing both economic growth and poverty reduction.
—— John Ross
Researcher, Chongyang Institute for Financial Studies
Renmin University of China
After a weak start at the beginning of this year, China’s economy rebounded thanks to policy support and property recovery. The stabilization of the Chinese economy and the foreign exchange market helped to boost confidence in other emerging market economies and global commodity prices in recent months. In the remainder of this year, we expect China’s growth momentum to slow to about 6.5 percent, as global demand remains anemic, the impact of the earlier policy stimulus fades and property investment weakens. However, we see little risk of a sharp slowdown, as we expect the government to intensify policy support again to ensure the achievement of the 6.5 percent GDP growth target, including by boosting public investment with sufficient credit support and accelerating pro-growth reforms. This stable outcome in China should help stabilize the global economy and financial markets, especially those in emerging economies. The biggest risk factor for global markets in the second half of this year is arguably a sudden shift by the US Fed or a sudden strengthening of the US dollar. We may see greater market pressures on capital outflows from China and on the yuan. Although we do not envisage the Chinese government changing its currency policy or allowing the yuan to depreciate against the US dollar beyond 6.8 this year, such pressures may lead to higher global investor risk aversion and further foreign exchange reserve losses, which could negatively impact China’s capital markets.
—— Wang Tao
Co-head of Asia Economic Research
United Bank of Switzerland
China’s growth in the second half of the year should hold steady. Bloomberg Intelligence Economics expects growth for the year as a whole to come in at 6.7 percent, comfortably inside the government’s 6.5 to 7 percent target range. Strong lending in the first half and resurgent property sales will support investment. A more competitive exchange rate and expectations of a return to wage growth in the US are both positives for exports. The critical question is whether policymakers can seize the opportunity presented by stable growth to press ahead with the twin tasks of deleveraging and structural reform. Deleveraging has to proceed slowly, given the risk of crystallizing stress in the financial system. A continued moderate deceleration in loan growth, and tighter controls on shadow finance, would represent steps in the right direction. Progress on increasing efficiency of State-owned enterprises is the crucial missing piece of the reform agenda. Current plans to merge major firms to create entities with global scale have the potential to generate efficiency gains. But the lesson of history is that megamergers have not always delivered the desired results. The onus will be on policymakers and management to show State ownership is consistent with improved performance.
—— Tom Orlik
Chief Asia economist of Bloomberg Intelligence