Conflicting prospects of China’s economy

SHIN KYUNG-JIN
The author is the Beijing bureau chief of the JoongAng Ilbo.

In an interview with CBS on February 4, U.S. Fed Chairman Jerome Powell spoke about the Chinese economy.

“Chinese economy’s meeting some challenges now, obviously. And growth has slowed. They’ve got away — gotten away from a market-led growth model. It’s more about the state-owned enterprises now. And it’s still too much associated with real estate investment and things like that. And you’re seeing — you’re seeing issues around commercial real estate there.”

Powell continued to discuss the U.S.-China relations. “Our economic relations with China are important, but they mostly consist of our, you know, buying Chinese manufactured product. So our financial system is not deeply intertwined with theirs. […] As long as what happens in China doesn’t lead to significant disruptions in the economy or the financial system, then the implications for the United States — we may feel them a bit, but they shouldn’t be that large.”

On February 8, Chinese President Xi Jinping advertised the Chinese economy’s bright prospects. In the Spring Festival address, he said, “When you look around the world, the scenery here is uniquely beautiful.”

In reaction, Yale University Professor Stephen Roach, an optimist about the Chinese economy, penned a column titled “It pains me to say Hong Kong is over,” in the Financial Times on Feb. 13. He wrote, “For a variety of reasons, the Chinese economy has hit a wall.”

During the Singapore Chinese Chamber of Commerce and Industry on Feb. 10, Singaporean President Tharman Shanmugaratnam said, “Wherever we look at the United States, China and globally, we face multiple uncertainties at the same time. […] But uncertainty does not mean a lack of opportunity. […] We have to look for opportunities. We have to spread our eggs and avoid concentrated bets. And most importantly, we have to deepen our own skills and strengthen the Singapore brand, wherever we go. […] And each of the major economies in Asia is too often viewed in black-and-white terms. There’s usually a kernel of truth in these narratives — whether pessimistic or optimistic — which is then embellished and amplified by commentators, and even in the markets. That is true for China today. […] If you look at major newspapers around the world, there will be some negative assessment of China’s prospects. […] That China has challenges is indisputable. It has challenges in its property market, challenges with excessive debts accumulated by its local governments, challenges with weak consumer sentiment and challenges with an undeveloped pension and social security system. […] What is also indisputable is that China has fundamental strengths, which are in several areas now growing and being fortified. It has a deep manufacturing ecosystem — no longer reliant on cheap labor — in many areas. […] We have to avoid black-and-white views and instead seek opportunities in China, in India, in Southeast Asia and globally, including in the United States and Europe — seek opportunities in a more uncertain and unpredictable climate.”

There are conflicting theories about the Chinese economy between stakeholders. We must have the wisdom to tell the truth as the heated battle over public opinion rages.