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Chinese economy to weather any storm

By YIFAN XU in Washington | China Daily Global | Updated: 2023-09-15 08:00

Tourists stroll through the nighttime market on Guanqian street in Suzhou, Jiangsu province on Aug 6, 2023. [Photo/VCG]

Consumption in process of going up, will help to overcome problems, expert says

An expert in the United States who has studied China's data and policies for addressing current economic problems refuted the notion that the economy is in trouble.

Sourabh Gupta, a senior fellow at the Washington-based Institute for China-America Studies, told China Daily that "consumption in China has been going up and has been going up on a secular line", a key reason he believes the economy will weather any storms. He also sees room for growth, as China is largely a middle-income economy.

Gupta also projected that the Chinese economy would grow by around 5 percent in the rest of 2023 and 2024 and at least 5 percent for more than the following 10 years.

"It's on a gradual improvement, and I see no reason why China will not hit the 5 percent target. I think it's going to go above 5 percent," he said.

Data released by the National Bureau of Statistics of China in July showed that China's GDP grew by 6.3 percent year-on-year in the second quarter of 2023, slightly lower than the market's expectations, due to a low base in the same period of 2022 and the effects of early stabilization policies.

According to Gupta, people were expecting a rapid rebound after the COVID-19 pandemic. There was a bounce in the first quarter but not in the second, so there was some anxiety about what was happening. However, he said, many of the indicators, even the negative ones, are pointing up in the short and medium terms.

He said the core inflation is increasing, and imports were seemingly down in value but up in volume; the urban household savings rate seems to be going down. He said those three examples show "there is greater consumption on the annual".

"The great challenge for China is to move to delink household consumption from just real estate and the property sector," he said. "That's doable, but it will take time to do that."

US Treasury Secretary Janet Yellen said the Chinese economy still has "a fair amount of policy space "at the G20 summit in New Delhi.

Gupta said some factors holding back China's economy are a wait-and-see attitude to purchase property and sluggish international demand due to the pandemic.

"But from a broader structural perspective, consumption in China has been going up and has been going up on a secular line," he said.

Policy boost

In July, the Communist Party of China Central Committee and the State Council jointly released "The Opinions on Promoting the Development and Growth of the Private Economy", aiming to build a "bigger, better and stronger" private sector.

The State Council last month released "The Opinions to Further Optimize the Environment for Foreign Investment and Increase Efforts to Attract Foreign Investment", including 24 policy measures such as ensuring equal treatment of domestic and foreign businesses and increasing financial and tax incentives.

"What you need to do is try to create a healthy economic environment in which the private sector feels confident in investing. It's trying to do what it can to draw private investment out to create a healthy, virtuous and cyclical recovery."

Chinese Foreign Ministry spokesperson Mao Ning on Tuesday refuted reports, mainly in Western media, that China's economy has been slowing down or even collapsing.

"All sorts of comments predicting the collapse of China's economy keep resurfacing every now and then. But China's economy has outlived them all. What has collapsed is such rhetoric, not China's economy," she said.

Gupta listed three reasons why China's economy will remain steady.

First, China is still, by per capita standards, a middle-income economy, and has the potential to go from an investment-led growth model to a more consumption- and services-oriented model. It also has dynamic firms in the private sector, with broad innovation in manufacturing.

Second, China has also liberalized its markets much earlier than the other East Asian markets like (South) Korea and Japan did in terms of services competition, said Gupta, pointing out that there is a lot of "entrepreneurialism" happening in China, which will help generate the pace of growth in the years going forward.

"China is moving to a much more entrepreneurial and sustainable growth track," he said.

Third, the Chinese government could release its potential to play a more significant role in supporting the consumption side of the economy, he said.

"Consumption doesn't mean only supporting household consumption. It also means the government is supporting consumption by being a big provider of public health, education, and pensions in terms of advanced country standards," Gupta said.

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