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ECONOMY: Economic Performance is Poised to Continue in 2018
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ECONOMIC PERFORMANCE IS POISED TO CONTINUE IN 2018
BY Morgan Brady

BT 201802 Economy 06受益于市场经济改革,我国成为世界上增长最快的经济体。2011年,中国在GDP上超过日本,成为世界第二大经济体。国际货币基金组织也曾说,中国是世界上具有最大国内国民购买力的国家。但中国的发展成就不仅在经济方面,更在社会整体。社会主义市场经济已使8亿人摆脱贫困,并缩小社会两极分化。另一方面,我国经济规模庞大,是生产和消费的主力军,也是制造业强国,更是全球最大的市场之一。由于美国、日本以及东盟多国是中国的主要贸易伙伴,他们对中国的经济表现高度敏感。在习主席的领导下,2018年很可能是经济持续健康发展,社会良性进步的一年。

我国经济在过去的25年中呈周期性波动。每个周期持续大约8到10年。1992年至2000年左右的第一个周期由15%的增长率下降到6%。而后,从2000年到2008年经济持续增长,增速从6.5%左右上升到15%。2008年我国经济受金融危机影响开始下降,之后经济恢复到12%的增长水平。最新的经济增长数据显示,2017年第三季度的增速为6.8%。

与西方国家不同,我国的经济增长模式更多地依赖于国家投资而不是私人投资,帮助经济实现了两位数的增长。同时中国大量投资海外市场,投资涉及房地产、交通运输、能源、金融和娱乐等多个领域。我国在海外的发展继续以制造业、人工智能和物联网等行业为重点。这使得技术知识回流到中国。

虽然中国有两个问题亟待解决:即首先必须解决日益严重的债务问题,其次,朝核危机等地缘政治问题需要平衡好。但综合来看,许多宏观因素是一致的,持续增长似乎是2018年的主要特征。

In 2011, China overtook the place of Japan as the world’s second largest economy in terms of nominal GDP. Having benefited from decentralization and shifting towards a market economy, it became the fastest growing economy in the world. Its pace of growth is the highest in recorded history. The IMF has also reported that China is the world’s largest country in terms of purchasing power parity of its GDP.
 

Yet, these achievements are not just economic but also social. The socialist market economy managed to lift 800 million people out of poverty and reduced social polarization. In 2015, China had managed to achieve all MDGs (Millennium Development Goals) and helped advance those goals elsewhere around the globe.
 

The sheer size of China’s economy makes it a major player in terms of both production and consumption. China is a manufacturing powerhouse and it is among the world’s largest markets. Countries like the USA, Hong Kong, ASEAN, and Japan, are highly susceptible to China’s economic performance since they are its key trading partners. The country is now critical to global supply chains, as well as global economic growth.
 

This high performance is not expected to abate anytime soon. Analysis of growth and contraction cycles supports the case for another wave of growth. Political stability in the country buoyed by its strong leader Xi Jinping can also give further impetus to this wave. 2018 may be another outstanding year for the country.
 

BT 201802 Economy 02Cyclical Performance

China’s economic performance is so robust that it did not have a single year where its GDP growth was below 6% for around 25 years. However, within the last 25 years, its performance fluctuated in cycles. Each cycle lasted for around 8 to 10 years. On the chart, the first cycle started from around 1992 and continued to 2000 with a decline from above 15% of growth to 6%. The second cycle lasted from 2000 to 2008 during which the pace of growth increased from 6.5% approximately to 15%. Then in 2008, the decline began, and it was severe due to the financial crisis. Afterward the Chinese economy recovered to a growth level of 12% but henceforth the pace of growth started to decline at a very slow pace. The most recent numbers about economic growth show a growth level of 6.8% in the third quarter of 2017.
 

The most recent cycle has overstayed its period, and the economy seems poised to welcome another era of growth given many factors, including prudent economic policy, better access to critical know-how, and growth of the middle class remain constant.

BT 201802 Economy 01Prudent Economic Policy

Unlike western countries, the Chinese growth model relied more on investment by the state than private investment. This model has proven to be effective for both China and India. It enabled two-digit growth and propelled many people to reach the middle class.
 

China invests heavily both at home and abroad. Its investments abroad are proliferating at a high rate as it competes for international markets. In fact, the value of China’s investments abroad totals 1.6 trillion USD, according to most recent estimates by the American Enterprise Institute. Investments cover a wide array of sectors including real estate, transport, energy, finance, and entertainment, among others. Investments are also widely dispersed geographically as they cover countries from all continents.
 

Nonetheless, the Chinese government remains conservative when it comes to certain types of overseas investments. It has been recently cracking down on investments abroad that do not fall in line with the investors’ core businesses. In the second half of 2017, China announced that it would prohibit companies from investing in sectors such as entertainment, real estate, hotels, and sports club, in an effort to clamp down on frivolous investments.
 

Access to Know-How via Investments Abroad

But the overly interventionist policy will not stop the rising trend of Chinese investments overseas, especially as investment abroad has not yet reached its full potential. China’s expansion continues with a focus on sectors such as manufacturing, artificial intelligence, and the Internet of things. Those investments lead to an influx of technological knowledge back to China. Even small investments abroad were helpful to China as they gave investing companies access to know-how that could be leveraged back home.

BT 201802 Economy 03Growth of the Middle Class

Research carried out by McKinsey and Company shows that more than 75% of urban consumers will earn $9000 to $35000 per year by 2020. This prediction has plenty of implication, given the role of the middle class in pushing forward economic development in China via small and medium businesses, as well as driving social transformation. Moreover, this will most likely have an effect on the country’s demographics and technological advancement. Increase in income will likely influence family size and longevity. It will also influence purchasing decisions towards more advanced technological devices. Current changes in Chinese societies will have an impact now and for decades to come, and this should only accelerate the already fast growth.
 

Conclusion

Many macro factors are aligned, and continued growth seems to be the main feature of 2018. Nonetheless, China has two important issues to address before they become a major hurdle. First, it has to address its mounting debt, which reached 260% of GDP and promoted Moody’s credit rating agency to downgrade the country’s sovereign credit rating. And second, China currently has to maintain a certain balance as the US requests it to put pressure on North Korea to give up its nuclear program. Those two issues might warrant some tensions, with geopolitics being the more signficant one. Aside from those, China’s expansion in the global economy seems to maintain its current trajectory, proving the notion that the state’s intervention can be fundamentally benign at times.

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