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China called ‘stabilizer’ of world economy

Updated: Jun 20,2016 11:59 AM Daily

China’s economy is growing at a stable rate as data in May indicated the world’s second largest economy keeps growing steadily in industrial manufacturing, service industry development, market sales, employment, and commodity prices.

Despite some doubts about China’s economic transformation, the international outlook on China’s economy is optimistic.

“Stability” and “development” are still the hallmark of the huge economy in transition.

According to World Bank’s global economic prospects, the international financial institution kept its expectation of China’s economic growth at 6.7 percent and 6.5 percent in 2016 and 2017, respectively.

Some economists say that under the context of a global economy facing increasing risks of downward pressure, the stability of China’s economy is particularly significant.

China’s economy is indeed developing at a stable rate and will keep playing its role as the “stabilizer” of the world economy. But difficulties remain at the same time.

From January to May, industrial investment increased 5.4 percent but was 1.5 percent lower than in the January-April period. Private investment growth rate also dropped 1.3 percent during the same period.

These difficulties result from the realities of industrial overcapacity, market access for private investment, and global economic dynamics.

But the main problem to tackle now is on the supply side, and that’s why the central government repeatedly stressed promoting structural supply-side reform, which will “address overcapacity, reduce inventory, deleverage, lower costs, and bolster areas of weakness.”

The initiative is effective as, in term of addressing overcapacity, coal production decreased 15.5 percent in May; reducing inventory witnessed a drop of 1.2 percent in industrial goods at the end of April, the first negative growth since 2010; and for the lowering costs efforts, value-added tax reform will lower taxes for enterprises by 600 billion yuan ($91.2 billion).

All these factors indicate that as structural supply-side reform keeps going, China will continue to develop steadily and serve as the stabilizer of the world economy.

As the CEO of Standard Chartered Bank stated in the Financial Times, China is facing huge short-term challenges, but the challenges are controllable, and the Chinese government has the ability and resources to cope with them and realize its economic growth target and transformation.