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26/09/2016

China critics fail to translate the good in its economic development

Trade & Society

China critics fail to translate the good in its economic development

Looking ahead, China and the EU, who share the timely goal of transforming their growth models, should find ways to manage their differences in a constructive way and adopt new initiatives, writes Yang Yanyi.

Ambassador Yang Yanyi is Head of the Chinese Mission to the EU.

A few days ago, I was chatting with some European business people. Naturally the conversation was focused on China. There were obvious worries and concerns. There were complaints that China had been making “bad stories” over the past few years: slowing down economic growth, stock market volatility, reluctance to push through reform and opening up, etc. It was considered to be highly likely that China would continue to generate “bad stories” this year.

I am not surprised. The history of China’s development has grown amidst the cacophony of the “China threat” or “China bankruptcy” fanfare. At times of obvious difficulty, those voices crying out about the China disaster could not be louder.

While our European friends’ concerns and worries could be appreciated, they failed to grasp the real picture. The truth is that China is making really good stories. Yet, unfortunately and regrettably, China has been made a victim of “bad stories”.

During the tough times we are facing in the current global climate, it is highly necessary and important for business people and policy makers to have a clear grasp of China’s real story and its strategic focus so as to make the right decisions.

Simply put, the positive trend of China’s economic development has not changed. China’s policy of deepening reform and expanding opening-up has not changed; and China’s economic contribution to the world’s economic growth has not changed.

China’s economic situation in 2015 could be described as “stable with progress”. The “progress” was mainly shown in three aspects: first, the economy realised medium-to-high speed growth under the new norm; second, consumption became the major driving force of economic growth; third, the service sector turned out to be the leading industry of the national economy.

Despite the weak recovery of and rising uncertainties in the global economy, the Chinese economy performed steadily within a reasonable range. China’s GDP grew by about $500 billion at the growth rate of 6.9%, which ranked it first among global major countries.

The unemployment rate was about 5.1%, the lowest since 2009. Consumption’s contribution rate to economic growth increased 15.4%, becoming the major engine for growth. The service sector’s contribution to GDP was 17%, which is higher than that of industry, becoming the leading industry that drives economic growth.

China’s import totals reached $1.7 trillion, remaining second globally. Oil imports grew by 8%. Outward foreign direct investment reached US127.6 billion, a year-on-year increase of 10%. China’s economic aggregate has exceeded $10 trillion and China’s role as a significant driving force of the world’s economic growth has not changed.

Looking ahead, China’s economic development policy in 2016 will remain consistent. Namely, China’s goal to build a moderately prosperous society in all respects is consistent. China’s policy of transforming development mode and restructuring the economy is consistent and China’s policy orientation of deepening reform and expanding opening-up is consistent.

Next month, China will put in place its 13th Five-year Plan, a plan that has a clear and strong focus on economic development and on striving for a higher-quality, more efficient, fairer and more sustainable growth, and a plan that aims at building a moderately prosperous society in all respects and doubling the GDP and per-capita income of urban and rural residents in 2010 by the year 2020.

We are fully confident to achieve this established goal. And our confidence is rooted in the following.

First, the fundamentals of the Chinese economy remain sound. China’s economy enjoys great resilience, huge potential and ample room for readjustment. China has a complete industrial system and efficient infrastructure network, as well as high-end orientation of production factors. We have over 7 million college graduates entering the labour market annually and the average schooling of the new workforce is about 13 years.

China’s invention patents ranks it first in the world and the amount of R&D expense is more than RMB1.4 trillion, ranking it second in the world. China boasts a vast market space.

The contribution rate of consumption in China’s economic growth has reached 66.4%. China has 680 million mobile internet users and over 100 million 4G network users, the largest in the world. With 20 million rural populations moving into urban areas annually, huge demands in investment and consumption will be generated.   

Second, China is guided by a new development approach featuring innovative, coordinated, green, open and shared development.

We are focusing on implementing the strategy of innovation-driven growth, boosting technological innovations and their application including mobile internet, cloud computing and big data and ensure balanced progress.

We are pursuing green and low-carbon development to improve the environment and ensure that our people live in a beautiful China with clean air, green eco-system and clear water.

We are integrating the Chinese economy more closely with the global economy, implementing the “Belt and Road” Initiative, giving foreign investment greater market access, particularly in the service sector, exploring a model of foreign investment regulation based on pre-establishment national treatment plus negative list, fostering a high-standard international business environment and building a community of shared interests.

We are improving people’s well-being and their living standards across the board, putting in place new institutions for equitable, fair and inclusive development made possible and shared by the people, so that more fruits of development will be shared by all in a more equitable fashion.

Third, equally important, China is strongly resolved to deepen reform in a comprehensive way and adjust the growth pattern and structure of the Chinese economy.

Given that growth fueled by huge input of resources and investment will be unsustainable for China and will put the world economy at risk, we have chosen not to resort to massive stimulus measures though we have the ability to do so.

Instead, to secure more efficient, solid and sustained growth, we are advancing structural reform to tackle the deep-seated and medium- to long-term problems in the economy. We are working to foster twin engines of growth, namely promoting mass entrepreneurship and innovation and increasing public goods and services and unlocking the dynamism of market players and creativity of the society. To this end, we are streamlining administration and delegate power, strengthening regulation and improving government services.

It should be acknowledged that the new round of massive transformation is bearing benefits. China’s economic structure is rapidly improving. Growth in high-tech industries is notably higher than the entire industrial sector. Consumer demands for information, cultural, health and tourism products are booming. Energy conservation, environmental protection and the green economy are thriving. New economic growth areas are rapidly taking shape.

It is true that China is bracing headwinds. There are vested interest and uneasiness. Yet, there is no question about the tenacity of the Chinese Government. One must have heard of this metaphor: China is pushing through comprehensive reform and further opening up with the determination of a warrior who cut off his wounded wrist to save his life.

For example, to effectively deal with the overcapacity problems of the steel industry, China has made unremitting efforts to control new capacity and eliminate outmoded capacity. Painful as it is and at a price of costing half a million jobs, China has cut its steel industry capacity by more than 90 million tons over the past few years and will continue to cut the steel industry’s capacity by another 100-150 million tons.

Whatever the difficulties and even resistances, our resolve to push forward structural reform is rock-firm and our commitment and policy to open up further will not change.

Fourth, China is opening up at a higher level, promoting its equipment, technologies, standards and services around the world, easing market access in finance, education, health care, old-age care and other fields and sharing with other countries the dividends of China’s prosperity and development.

Though the growth of China’s foreign trade volume has slowed down, the actual amount of commodities China imported has continued to go up and China is pursuing a more proactive import policy and placing greater emphasis on the quality of imports and exports, and will only buy more from the world to meet its growing domestic demands.

All these efforts, as they unfold, will give strong momentum to the Chinese economy, while generating enormous demand and becoming a new source of growth for the world economy.

In a nutshell, though not at all perfect, China has been reforming, improving and transforming, making real good stories for the benefit of its 1.3 billion people and the common good of the humanity.

Not only it is necessary to put China’s development in perspective and know better what kind of story China is making, but also highly necessary to get a clear and firm grasp of the relevance and implication of China’s new normal on the EU’s integration agenda and strive for growth, jobs and competitiveness.

Taking a closer look and one will not fail to appreciate the complementarities between China’s supply side structural reform and the EU’s ongoing reform and restructuring, and the far-reaching significance of building synergies between our respective strategy and agenda, and tapping the full potential of our cooperation to achieve our shared aspiration for peace, prosperity and progress.

In this connection, we are very much encouraged that our top leaders reaffirmed during the 17th China-EU Summit last June the direction of China-EU relations, and reiterated their commitment to a positive, long-term strategic perspective and a rational approach to handling their relations while transcending differences in social system, cultural tradition and ideology.

We are even more encouraged with new headway made in our cooperation.

The 5th China-EU High-level Economic Dialogue (HED) was successfully held last September. The China-EU 2020 Strategic Agenda for Cooperation is being fully implemented. Negotiations for a China-EU Investment Agreement are yielding substantive progress. Cooperation in finance, energy, technological innovation, sustainable development and urbanisation has been intensified.

China-Central and Eastern European Countries (16+1) cooperation is pressing ahead. Consensus has been reached between China and the EU in five new areas: drawing synergies between China’s Belt and Road Initiative and EU Investment Plan, establishing a new Connectivity Platform; collaborating in digital economy and cyber security; launching a legal affairs dialogue; and facilitating people-to-people exchanges.

To follow up on the 5th China-EU HED, the 1st Working Group Meeting of China-EU Connectivity Platform and the 3rd Meeting of the Technical Working Group on China-EU Cooperation on Investment were held respectively lately with a strong emphasis on deliveries. 

There is no denying that due to divergence in their social systems, ideology and levels of development, China-EU relations might encounter differences and difficulties. With the growing scale of our economic and trade ties, while more space for development and greater opportunities for cooperation will be opened up and while some differences will be patched up, some old and new “irritants” may grow or crop up.

If history serves as a guide, the most important thing is we always keep the overall situation and long-term interest in mind, manage our differences in a constructive way, and adopt new initiatives and narrow the gap by increasing the opportunities for cooperation.

This is the valuable experience derived from 40 years of China-EU relations and the most significant political wisdom that will chart the course of China-EU cooperation in the years to come.

Looking ahead, China and the EU, sharing such objectives as transforming growth models, accelerating structural adjustment, raising the quality and returns of growth, promoting employment as well as improving peoples’ well-being, will continue the endeavor to enrich and upgrade their cooperation and open up broader prospects for a win-win relationship.