China central to economic policySouth Korea and the rest of the world rely heavily on China, the world’s second-largest economy and one of the fastest growing. It is why the annual session of the National People’s Congress, in which government officials report about their policies for the year to the Communist Party, is closely watched by investors and officials around the world. Chinese Prime Minister Li Keqiang said in Wednesday’s address to the annual congress that the government will maintain a 7.5 percent growth target for 2014, unchanged from last year. The government pledged sweeping reforms and aggressive spending to meet the target. Reforms will include the liberalization of state-run industries and the promotion of the services sector to stimulate consumer spending. Beijing also indicated an easing of control over exchange rates.
China will beat expectations if its economy grows at 7.5 percent, following 7.7 percent growth in 2013. Many had expected Beijing to target growth of 7 percent in light of uncertain external and domestic factors, as well as growing demand for restructuring.
China’s economy slowed from double-digit growth in 2012. Beijing since has set growth targets below 8 percent and endeavoured to retool the economy toward building domestic demand. It has repeatedly sent messages that it will concentrate on fighting poverty and strengthening the domestic market for more balanced and sustainable growth. China is our biggest market, accounting for 26 percent of South Korean exports. Without meeting the needs of the Chinese, we cannot capitalize on the potential boom in one of the world’s largest consumer markets.
We also should brace for the potential devaluation of Chinese currency. The yuan has fallen more than 1 percent against the U.S. dollar in the past month, and Beijing has said it will allow greater volatility in the exchange rate. It may be willing to stop interfering and let the yuan depreciate. Korean companies may have to compete against cheaper Chinese products, as well as Japanese exports benefiting from weaker yen. Korean companies must work harder to improve productivity and quality.
In two years’ time, China is expected to outperform the United States in terms of gross domestic product with an economy worth 19 trillion won ($17.9 million). We must get accustomed to China as the world’s leading economy. The Korea-China relationship has improved to some extent recently. The government and companies must join forces to polish its strategy on exports to China.
JoongAng Ilbo, March 7, Page 30