Illustration: Luo Xuan/GT
As the first large-scale international economic forum held in China following the two sessions, the China Development Forum has attracted much attention in the past. With the theme "China and the World: Economic Transformation through Structural Reforms," this year's forum participants were more concerned about international problems and expressed more worries over real estate bubbles and financial risks than China's short-term growth and its currency trend.
After the reduction of excess capacity and real estate destocking over the past year, the Chinese economy showed improvements in the first quarter of this year. Chinese Vice Premier Zhang Gaoli confirmed the progress in the keynote speech at the forum.
At last year's forum, participants were concerned about the depreciation pressure on the yuan, and even argued over the possibility of a substantial devaluation in the currency. Yet, this year, no one worried about the yuan's exchange rate. Former US Treasury Secretary Henry Paulson mentioned at his speech that there is no evidence of Chinese currency manipulation, adding that the IMF also agrees with that conclusion. He also said that everyone hopes the yuan's rate could stabilize or appreciate moderately.
Despite the general optimism over short-term economic growth, participants were cautious toward real estate bubbles and financial risks. Housing prices in some Chinese cities have still surged sharply this year even though prices rose significantly last year and various local governments issued strict housing control measures. Liu Shijin, former vice president of the Development Research Center of the State Council, said at the forum that due to land transfer revenue, local governments always tend to push up housing prices, which, however, boost the production and operation costs greatly and weaken cities' competitiveness. Liu also mentioned that real estate tax should be introduced as soon as possible and that the government should accelerate land system reform at the same time.
In regards to international issues, after black swan events such as Britain's vote to leave the EU and US President Donald Trump's unexpected win, discussions over changes to the world, especially Sino-US relations, were a focus of the forum.
During the 2015 forum, former US Secretary of the Treasury Robert Rubin mentioned a "phenomenon" in Sino-US diplomacy - that the two parties often started the discussion of bilateral relations with criticism. The US complained about the intervention in the yuan exchange rate, the Chinese government's unfair subsidies in land, energy and other sectors and weak protection of intellectual property rights; while China criticized US restrictions on high-tech exports to China as well as limits on Chinese investment access to the US.
How will the Sino-US relationship evolve with Trump in office? Paulson said at the forum that "bilateral economic ties serve as the ballast and engine for Sino-US relations, adding that both countries had benefited from the nearly $600 billion trade relationship," according to the Xinhua News Agency. Charlene Barshefsky, a former US trade representative, said that "the US-China trade relationship is viewed in the US as very skewed in favor of China, even by elites," according to the Reuters. Barshefsky also added that in the future, in order to move the Sino-US relationship forward, China needs to further reform and open its economy, reduce discriminatory measures against foreign companies, promote protection of intellectual property rights, lower regulatory barriers and increase investment in the US to boost local employment.
China could also take the initiative in easing the negative impact of the US' anti-globalization, which will be conducive to the long-term development of the bilateral relations. The Sino-US relationship is the world's most important bilateral relation, and both countries are the biggest beneficiaries of globalization. Given China's fast-growing market demand, the US should give serious consideration as to whether launch a trade war. On the other side, China could further open its market and implement reforms to promote market fairness, which would not only reduce the possibility of a trade war but would also be in line with China's reform direction.
The author is managing director and chief economist with Mizuho Securities Asia Ltd. firstname.lastname@example.org