Illustration: Peter C. Espina/GT

The world economy has remained volatile since the 2008 US subprime mortgage crisis, and the recovery in emerging economies has been increasingly accompanied by negative interest rate policies in developed economies. According to overseas media research, 24 percent of global GDP is produced in countries that have negative interest rate policies. What's more, the global bond market has more than $700 billion worth of debt securities that have negative bond yields.

This has triggered concerns among financial professionals and economists, fearing that wealth is being plundered in this era of negative interest rates. China still has positive interest rates, and the country mustn't lose its sense of proportion. What we should pay attention to is what negative interest rates signify, and who is losing out from them.

The most direct victims are holders of currencies with negative interest rates, and buyers of money market funds. Although commercial banks haven't rushed to apply negative rates to their savers, the rate of return from money market funds is at stake. In fact, this is exactly the purpose of certain central banks in going negative - they want private capital to be directed into the real economy instead of lying around in savings accounts. This describes a similar goal to China's ongoing supply-side reform. They both invite more private capital to solve the low efficiency of government investment, and to achieve the goal of full employment and reasonable inflation.

In the eurozone, the whole world is wrangling over the future of Greece, even though it only accounted for 1.7 percent of the eurozone's economic output in 2015. But in Spain, meanwhile, which accounted for 10.4 percent of eurozone economic output in 2015 and almost one third of eurozone unemployment, there has been a strong economic recovery.

Backed by strong support from the European Central Bank (ECB), Spain's banking industry has completed its recapitalization after having acquired enormous capital injections. With regard to Spain's property market, which was severely impacted by the European debt crisis, the bad debt brought by property assets has been gradually offloaded, and the unemployment rate has begun to drop. Also, after years' of contracting fiscal expenditure, the Spanish government has attempted to cut personal income tax rates, indicating the initial effect of supply-side reform under more expansionary monetary policy.

It can be seen that the nature of the eurozone's negative rates is a wealth grab from global financial investors by using their capital to purchase European sovereign debt and subsidize the real economy in troubled EU countries. In this respect, apart from China's status of being a passive victim as a result of having the world's largest amount of foreign exchange reserves, the victims also include petrodollars from the Middle East that are more dependent on gilt-edged securities, and sovereign wealth investment from manufacturing countries in Asia like South Korea. Worse, even though the US hasn't blatantly adopted nominal negative interest rates, the federal funds rate has been lower than the US inflation rate for years, so real interest rates in the US are negative.

This situation has put China on the defensive. To counter this wealth grab, the "One Belt, One Road" strategy, together with supply-side reform domestically, is the best strategic combination for a developing economy. After all, the yuan has become the only currency with positive interest rates among the world's major economies. Meanwhile, macro economic data for China's first quarter in 2016 has largely exceeded market expectations. Apart from enhanced infrastructure investment that started in the second half of 2015, the upgrading of domestic consumption and varied consumption segments have provided more room for China's supply-side reform.

But we should stay alert to the potential risks brought by supply-side reform. The initial effect brought by destocking and reducing outdated capacity is a slowdown in growth and increased unemployment.

China, as one of the world's largest economies to take a lead in setting economic restructuring as the tone of its policy, should stick to its path of disruptive restructuring, and should set regular fiscal and monetary targets.

It also needs to push forward with mixed-ownership reform in State-owned enterprises, and upgrading of local governments' investment and financing models. China should also foster development of the "One Belt, One Road" initiative and strengthen the internationalization of the yuan, so that all these aspects can help achieve the goal of optimizing allocation of resources.

Negative rates adopted by central banks around the globe have further demonstrated China's advantages. Domestic consumers' saving and consumption habits have been swiftly evolving, following the initial phase of China's urbanization. Financial investors around the globe are expected to see sound infrastructure investment yields in China's central and western regions, and the enormous added value from growing consumption.

The author is chief economist with AVIC Capital Co. bizopinion@globaltimes.com.cn