economy – भारतीय रोज़ नई ख़बरें

Foreign executives, officials bullish on Chinese economy in Boao, denying ‘Peak China’ rhetoric

Participants take photos at the permanent site of Boao Forum for Asia in Boao, South China’s Hainan Province, on March 27, 2024. Photo: VCG

During a panel discussion at the Boao Forum for Asia (BFA) Annual Conference, executives from foreign-funded enterprises and officials from international institutions said they remained bullish on China’s economic growth in 2024, noting that innovation, consumption and green development will constitute a new China story.

As the world’s second-largest economy and important growth engine for the world economy, China’s development has attracted much attention. The remarks by the participants at the BFA strongly denied the so-called Peak China rhetoric, as the country’s economy is on course to recover.

Jean-Pierre Raffarin, former French prime minister, said that China’s 2024 growth target of about 5 percent is good, and the world economy needs China’s growth, as well as its innovation.

Steven Barnett, the IMF’s senior resident representative in China, said that last year, China’s economy contributed one third of global growth, and its growth is beneficial to the world.

Every one percentage point rise in China’s GDP growth will drive an increase of 0.3 percentage points in the economic growth of other countries, so strong GDP growth in China is not only good for China, but also for the rest of the world.

Regarding this year’s GDP growth target, Denis Depoux, global managing director of Roland Berger, said that the figure is not important in itself, more important thing is the transformation that is represented underneath the 5 percent goal.

There are some main themes to the new China story: innovation, new quality productive forces, decarbonization and consumption.

This photo taken on March 25, 2024 shows the Boao Forum for Asia (BFA) International Conference Center in Boao, South China’s Hainan Province, is ready for the upcoming forum. The BFA Annual Conference 2024 will be held from March 26 to 29 in Boao, focusing on how the international community can work together to deal with common challenges and shoulder their responsibilities. Photo: cnsphoto

Multinational companies, which have benefited from China’s double-digit average economic growth rate in past decades, now eye more opportunities in the Chinese market, including industrial upgrading and green development, Depoux said.

Michele Geraci, former undersecretary of state at the Italian Ministry of Economic Development, told the Global Times that China’s economic growth has made a positive contribution to regional and global development.

He has observed that China is moving some of its manufacturing into other countries in Asia that may appear lower on the manufacturing chain and are still behind the development curve. This change is a win-win for both China and other Asian countries, the Italian scholar said.

While praising China’s huge achievements in the green economy, Geraci said that this is one of the key areas for future economic cooperation between Europe and China. He called for China-EU cooperation in the green transition.

“The other area for such cooperation is the development of infrastructure in third countries, such as in Asia and in Africa. In the developing markets of Africa, for example, China has a strong presence and European companies, including Italian ones, can bring complementary expertise,” said Geraci.

Since the beginning of this year, China’s economic fundamentals have continued to improve, and positive factors bolstering the economic rebound have accumulated and increased.

Figures from the National Bureau of Statistics showed that in the first two months, the value added of industries over the designated size grew by 7 percent year-on-year, retail sales rose by 5.5 percent, investment in the manufacturing industry increased by 9.4 percent, and total trade grew by 8.7 percent, ushering in a promising year.

“If China’s economy maintains a growth rate of at least 5 percent this year, it would be feasible to achieve a contribution rate of 30 percent or more to global economic growth, provided that the exchange rate remains relatively stable,” Tian Yun, a Beijing-based economist, told the Global Times on Thursday.

“If trade with the US follows the recovery seen in January and February, it would significantly boost the Chinese economy. In addition, residential consumption holds significant potential to support economic growth,” Tian noted.

If consumer spending and investment flourish, achieving a 5 percent growth rate this year is attainable, given ample market opportunities and robust production capabilities of China, Tian said.

Well calibration of fiscal, monetary policies to ensure 5% GDP growth in China

A view of the Lujiazui area in Shanghai Photo: VCG

A well-calibrated fiscal and monetary policy combination, being crafted and orchestrated by Chinese government, will help resolve the intrinsic problems hidden in China’s economy. An aggressive fiscal stimulus, coupled with proactive while prudent monetary policy, is generally thought to provide the economy with sustainable energy, shepherding it to grow by around 5 percent in 2024.

Independent economists of many international organizations give high marks for Chinese economic policymakers’ learning and wit in blending the monetary and fiscal policies in the past four decades to shore up rapid economic growth, and at the same time successfully resisted the cyclical pressures of inflation and deflation.

Entering 2024, China’s economy has to overcome the “scar effect” left by the COVID pandemic, including a relatively lackluster domestic consumption and a churning real estate market. Amid the lingering concern about another public health upheaval, the people now tend to snap shut their pocketbooks, and the millennials and generation Z are increasingly hesitant to raise children.

Under these circumstances, the traditional days of steadily growing consumer prices are gone, as China witnessed several months of negative CPI growths in the second half of 2023. To deal with the deflationary pressure, China’s central bank moved to reduce the bellwether loan prime rates (LPR) of both one-year and five-year lengths. Last month, the central bank went aggressive, cutting the five-year LPR by a full quarter percentage, which also has the effect of ramping up the country’s humdrum housing sales as mortgage rates are slashed too.

Meanwhile, the policy-makers decided to introduce proactive fiscal stimulus measures to fuel up public spending and economic growth.

In 2024 alone, at least 4.9 trillion yuan of central and provincial government bonds will be sold, with the proceeds to be channeled to building up important public infrastructure projects and fostering new quality productive forces to meet China’s massive market demand for home-grown advanced semiconductor chips, newest AI and algorithm innovations, nationwide 5.5-G mobile network coverage and highly efficient digital business platforms – able to catapult China’s economy to new heights of growth before 2050.

China is determined to “choose transition from high rates to high-quality of growth,” said International Monetary Fund Managing Director Kristalina Georgieva at the just concluded China Development Forum held in Beijing. In her speech to the event, she remarked that China has entered a new era of economic growth, and the country will continue to be a key driver of and a contributor to global economic growth in the coming years.

And, renowned US economist Nicholas Lardy, senior fellow at the Peterson Institute for International Economics and a former senior fellow at the Brookings Institution, told Chinese media that it is unwarranted for many media pundits in the West to disseminate the narrative that “China’s economy is collapsing” and faces a catastrophic outcome. Instead the economy is recovering, and last year’s 5.2 percent GDP growth “is impressive” among major economies.

For a long time, one of the important reasons why the Chinese economy has been able to scale new heights constantly by overcoming domestic difficulties and withstanding external headwinds is its deep understanding of economic laws, and the decision makers’ creative ways to exploring new and potent growth drivers, as well as the country’s firm determination to implement systemic restructuring, such as the country’s unswerving focus on developing clean renewable energies and battery-powered electric trucks and cars.

Georgieva thought highly of China’s green development. She described China as a global leader in deploying renewable energy with enormous potential, adding that China was making rapid progress in green mobility. China’s remarkable development success has delivered tremendous benefits to hundreds of millions of people in the world, she said.

Georgieva said that China’s high-quality development still has a bearing to deepening marketed-regulated reforms and giving priority to private sector growth. Deep structural reforms can enhance the conditions for entrepreneurship, innovation and economic performance. For example, a boost to government finances at the macro level could allow some tailored micro changes in taxation policies on businesses to foster fast growth of new enterprises, aligned with the central bank’s monetary policy to increase liquidity through reserve ratio reductions and interest rate cuts.

And, ramped-up government spending is a key component of aggregate demand that can be strategically important for economic development. China’s central government has announced the issuance of new ultra-long special treasury bonds in each of the following several years to focus on funding major national projects. No matter it is the development of industrial parks, transportation hubs, public services and highly educated and skilled Chinese work force, government spending is indispensable to underpin the growth of future strategic industrial lines.

The drivers of demand include household consumption of goods and services, private investment, government investment and net exports. As to augmenting China’s domestic consumption – a pivotal part of economic growth, the government has pledged to implement a national drive to provide incentives to encourage trade-in of old household appliances, cars and furniture with new models. The replacement of old automobiles, inefficient in fossil fuel use and polluting the air, with Chinese brand-new electric vehicles will also significantly help improve China’s urban environment. And, Chinese local authorities are encouraging citizens to have more family outings and leisure time to increase cultural and tourism spending.

Regarding foreign trade, despite the headwinds of geopolitical tensions which are affecting trade and capital flows, China saw a robust take-off of foreign trade in the first two months this year, largely thanks to the high-quality and low-price of made-in-China goods, like heavy machinery, home appliances, electric cars and a wide variety of electronic devices. In 2024, China’s total exports of goods will likely grow by 6-8 percent over 2023. Investment, domestic spending and export will guarantee the economy to expand by around 5 percent this year.

IMF head Georgieva said she is confident that China and the world can tackle the challenges this globe is now facing and they can always cooperate to create a more prosperous future in this century.

The author is an editor with the Global Times. [email protected]

China’s commitment to innovation shines bright on quality development: Nobel laureate Edmund Phelps

An employee inspects a cellphone chip at an electronic product research and development company in Ningbo, East China’s Zhejiang Province on February 22, 2024. The company’s products are exported to more than 80 countries in Europe and Latin America, and its overseas order book is full through the second quarter of 2024. Photo: VCG

Editor’s Note: China’s economy is undergoing a critical transformation toward quality growth. During the process, there are many pessimistic views from Western media about China’s economy. However, China has maintained stable growth despite challenges and reaffirmed its commitment for promoting innovation and high quality economic development. How should we objectively observe China’s economic transformation? Nobel Laureate, Professor Edmund Phelps, author of books Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change and The Logic of Growth, shared his perspective with the Global Times.

GT: China’s economy is undergoing a critical transformation toward quality growth. How do you perceive the role of innovation in China’s economic growth?

Phelps: The generation of innovation is the main driving force behind China’s economic transformation and upgrading. For China’s economy to further the transition toward high-quality development, there is nothing more important than achieving a higher level of independent innovation.

China used to produce products innovated by other countries, but that has changed with the emergence of corporate giants like Alibaba, Tencent, and ByteDance. China has achieved admirable innovation-driven development in both emerging and traditional sectors including finance, artificial intelligence, and bio-tech.

Currently, China’s independent innovation keeps improving for a few reasons. First, Chinese enterprises are actively studying foreign products and methods, which inspire them to create new products and methods. Second, with the increase in wage levels, Chinese exporters need to develop new products and technologies in order to survive. Third, the level of education has increased, allowing more people to benefit from the new economy. Fourth, local governments have become more supportive of policies that support independent innovation.

GT: The growth of exports of the “new three items” in China’s foreign trade has surpassed 1 trillion yuan in 2023. China has cultivated around 400,000 high-tech enterprises. China’s number of intelligent factories ranks first in the world. How do you view these breakthroughs? How do you view China’s progress and advantages in promoting innovation?

Phelps: For a long time, people have believed that sustained growth and development require continuous innovation. Since the reform and opening-up, China’s innovation mainly relied on imports, but in the past decade, independent innovation has become very important. China can introduce foreign innovative products at an acceptable cost, but it should also shift its focus toward independent innovation.

In recent years, it has been crucial to shift from “Made in China” to “Innovated in China.” This kind of technological progress is needed to enhance productivity and consequently increase wage levels. No one can predict the contributions of leading innovative Chinese enterprises to the global economy, but I believe they will make significant contributions to the global economy.

There is evidence now that a large number of Chinese people have the ability to innovate. Data on independent innovation in China and G7 countries shows that China was already ranked fourth in the 1990s. In the following decade, the rankings of the UK and Canada declined, with China rising to second place, not far behind the US.

Currently, innovation from the US is much less than it was in the past, and there is almost no innovation coming from Europe. Therefore, China can become a major source of global economic innovation. This is a valuable opportunity for China to become a major leader in innovation.

GT: The 2024 Government Work Report is sending an important signal for high-quality development, emphasizing the acceleration of the development of new quality productive forces, actively nurturing emerging industries and future-oriented industries, as well as deepening the promotion of innovation and development in the digital economy. How do you view China’s commitment and potential in promoting innovation?

Phelps: China is currently making many high-tech innovations, and continuing to strive in this area is a wise move for the country. As time goes on, we will see what progress China makes in this regard.

China has taken various measures to promote innovation and entrepreneurship, such as significantly reducing the procedures for establishing new companies, building numerous schools, and facilitating the entry of foreign professionals into China. Equally important is China’s recognition of the importance of allowing competition in the economy. There is clear evidence that China is moving toward the path of entrepreneurship and innovation. The government has reiterated its determination to protect new patents and it is well known that China registers a considerable number of new companies every week.

GT: How can China further unleash its innovative potential to boost its economy?

Phelps: If China wants to achieve great economic flourishing, it must provide extensive opportunities for innovation. The obstacles faced by China, the US, and Europe are the same. In order to continue driving economic growth and achieving mass flourishing, we need to address some fundamental issues, such as how to mobilize mass innovation and how to enable people to achieve self-development.

China needs to accelerate its pace of independent innovation by:

Cultivating entrepreneurs, who will find the direction for business development in a world full of uncertainty and use their abilities to solve new problems.

Cultivating innovative companies, which require imagination, curiosity, and deep insight into new trends.

China needs to change its perception of independent innovation. Innovation does not end with the conception of new products or methods; it requires the widespread application of these new ideas into commercially viable products or methods.

To achieve large-scale innovation, China needs to provide a suitable environment of incentive, establish necessary systems, and remove barriers to innovation. Only when the people are energetic can innovation occur, and the national economy can develop.

To achieve faster development, China needs to cultivate more scientists, and these scientists need to apply their research to the creation and commercialization of new products and methods. This is essential for increasing productivity.

GT: Some media claim that China’s economic growth is peaking, how do you view such opinions? Do you have confidence in China’s economic prospects?

Phelps: Since the reform and opening-up, China has improved productivity and wage levels in multiple dimensions. In the coming years, China will further enhance productivity and wages through grassroots innovation. As more Chinese people engage in innovation, the inclusiveness of the Chinese economy will inevitably expand, leading China toward economic prosperity.

China can certainly achieve a high level of economic prosperity through independent innovation. Almost the entire world is facing a shortage of innovation capabilities, with some countries experiencing this for decades. Most countries have not found a way out. Now, China is taking the lead in the path of mass innovation.

GT: China’s capacity to educate and attract human capital keeps improving, with the largest number of STEM graduates. How do you perceive this advantage contributing to the promotion of innovation?

Phelps: The current wage growth level in China has already been able to meet people’s basic material needs. People are beginning to highly value whether they are in an environment full of innovative spirit, and they are starting to pursue a sense of achievement through innovation. By shaping a vibrant innovative environment that stimulates people’s minds to think about a series of new issues, China will become a world leader in innovation.