As the Chinese economy improves, why are some skeptics so pessimistic?

By Cao Heping Source:Global Times Published: 2019/5/14 21:17:17

Illustration: Luo Xuan/GT

The Chinese economy recorded a good start this year, with GDP growth hitting 6.4 percent year-on-year in the first quarter, better than the 6.2 percent forecast. Overall, economic development generally maintained steady progress. However, some people have always been skeptical about the positive performance of the Chinese economy. For instance, a so-called "internal investigation" surfaced at the end of last year saying that after deducting the price factor, China's actual economic growth rate was negative in 2018. 

So, what is the true picture of the Chinese economy during the period in question? Some gauges of the real economy could be used to measure whether the strong economic start this year has the support of the real economy. First of all, China's purchasing managers' index (PMI) - a gauge of the manufacturing sector - came in at 50.5 in March, up from 49.2 in February. It was the first time in two years the reading rose above 50, the mark that separates industrial expansion from contraction. Generally speaking, if the PMI rises in a certain month, the overall economy will see consequent increases in the next one to two quarters.

Second, China's fixed-asset investment and retail sales rose by 6.3 percent and 8.3 percent, respectively, in the first quarter of this year, slowing by 1.2 percentage points and 0.7 percentage points compared with the previous year. While the decline in the growth rates may point to the conclusion of a continuous economic slowdown, the marginal trend indicates that the growth pace was gradually steady.

Thirdly, China's employment has always been bullish, with double-digit growth seen in the internet sharing economy. The employment gap caused by the slip in real economy investment and demand may be offset by the increase in the services sector under the internet economy. Considering the rapid rises in China's digital economy and in the proportion of the services sector, plus the adjustments to monetary and credit policies in the first quarter as well as fiscal and tax reduction policies, we can say that the Chinese economy has almost finished transitioning from ultra-high growth to a medium-high pace under overall favorable conditions, and the supply-side structural reforms continue to ensure steady economic growth.

As for global trade, in the past two years, the US has initiated a trade war against China. Chinese people have basically seen how the "scare" attacks unfolded and prepared themselves mentally. The possibility of a huge impact from foreign trade due to US pressure is declining.

The Chinese economic data generally point to a better situation in both domestic and overseas terms. So why, in the face of good news, are some still easily convinced by manipulated information surrounding the trade frictions?

There are two reasons behind the phenomenon. The first is the idol effect. Over the years, some people have seen the US and Western standards as their benchmark, habitually believing that Western views are superior to ours. These people, who have more knowledge of Western theories than China's actual conditions, have developed a habit of looking at a Chinese problem from a Western perspective, ignoring their advantages in observing the true economic performance from the Chinese perspective. The bearish sentiments surrounding China's housing price "collapse," banks "overwhelmed" by non-performing loans, and the local government debt explosion in the past were all the result of such a mindset. It is not that these industries have no problems, but that this type of thinking has often magnified the problems in China.

The second is the squeeze-out effect. At the beginning of the four decades of reform and opening-up, processing manufacturing and manufacturing of daily necessities were the two industries that were first engaged in global trade. During this process, import and export credit institutions, enterprises and financial institutions that served these industries also learned the operation standards and management ideas of Western banking, affecting those in relevant research fields. After they accepted the Western critical perspective on the Chinese economy, the difficult transformation of the traditional processing trade and the impact of the Western media have somehow distorted their views on the real situation of the Chinese economy. The panic and anxiety they created have confused and misled those who don't have relevant professional knowledge and those in traditional industries.

Some positive and sustainable things in the Chinese economy have been ignored intentionally or unintentionally as those who control public opinion-oriented resources always take Western perspectives as their reference and guiding viewpoints.

A Chinese perspective should be formed on the basis of studying Chinese problems and collecting Chinese facts and science. 

The author is a professor with the School of Economics of Peking University.


blog comments powered by Disqus