BEIJING — Doomsayers about China’s economy have been wrong in the past, and they are wrong again today, said prominent US economist and author Stephen Roach — who added that the country reported first half GDP growth of 6.9, exceeding the 6.7 percent rise in 2016, as well as beating the consensus of forecasters.
Forecasters find it difficult to resist superimposing cliches about developed economies on China, but they overlook deeper issues shaping the China growth debate, said Roach, who is a senior fellow at Yale University’s Jackson Institute for Global Affairs.
The latest bout of pessimism over the Chinese economy has focused on the twin headwinds of deleveraging and a tightening of the property market.
Roach said that China, with a far larger savings cushion than others and a relatively small sovereign debt burden of 49 percent of GDP, was in much better shape to avoid a sovereign debt crisis.
There is always good reason to worry about the Chinese property market, but unlike those of other fully urbanized major economies, China’s housing market enjoys ample support from the demand side, noted Roach, who is the former chairman of the Morgan Stanley’s Asian operations.
International financial heavyweights upgraded their outlooks for the Chinese economy.
The International Monetary Fund recently raised its estimate for China’s 2017 growth to 6.7 percent, 0.1 percentage points higher than its last prediction.
The IMF move has been interpreted as a show of confidence in China’s economic growth, considering a solid first quarter underpinned by previous policy easing and supply-side reform, including efforts to reduce excess capacity in the industrial sector.
JPMorgan and Nomura Securities raised their annual growth forecasts to 6.8 percent from 6.7 percent, respectively, while Citigroup and Standard Chartered Bank both revised their 2017 projections upward by 0.2 percentage points to 6.8 percent.
The expanding consumption and services industries as well as increasing private investment in China will boost growth despite slowing investment in infrastructure and real estate in the second half of the year, on top of a financial deleveraging, said JPMorgan.
The Asian Development Bank revised China’s growth up to 6.7 percent this year and 6.4 percent next year, from 6.5 percent and 6.2 percent, respectively, in its latest outlook supplement.
The ADB said increases in both domestic consumption and foreign trade helped promote China’s economic outlook, which came as a result of a steady rise in both personal income and public spending.
Acknowledging China’s slower economic growth with reformed structures under the new normal, these institutions showed less concern about prospects of a hard economic landing for the country and financial risks compared with last year, and indicated that China is expected to continue stabilizing.
“What happens in China doesn’t stay in China,” said Maurice Obstfeld, IMF chief economist. “Strong Chinese growth drives growth particularly in Asia, but also throughout the world.”