China Economy Growth: Here’s What Both Sides Are Saying

The Flag Staff Contributor
China Economy Growth: Here’s What Both Sides Are Saying
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China economy growth will outpace that of other developed nations. Here’s what outlets both at home and abroad are saying about China’s economic figures. To have stories like this and more delivered directly to your inbox, be sure to sign up for our daily newsletter.

Top story from CNBC: “China reported Monday that its economy grew 2.3% last year as the world struggled to contain the coronavirus pandemic. Gross domestic product rose by 6.5% in the fourth quarter from a year ago, official data from the National Bureau of Statistics showed. Those numbers beat analysts’ expectations.” Here’s what outlets at home and abroad are saying about China economy growth:

Domestic Publishers: Both right and left-leaning outlets in the United States urge readers to take a deeper look at the data. On the right, The Wall Street Journal Editorial Board says that “some of Beijing’s cheerleaders want you to believe [the impressive growth] is mainly because the Chinese government acted so aggressively to suppress the pandemic.” The WSJ Ed Board says a closer look at the figures, however, shows that growth came from elsewhere. The WSJ Ed Board says “China’s Communist Party reverted to its old economic-crisis playbook to goose debt and exports while tightening political dominance over the economy.” For example, “New credit has exploded, with total public and private debt expected to exceed 270% of GDP in 2020, up 30 points in one year. Much of that has gone to state-owned firms and exporters.” At the same time, “retail-sales growth slowed as the fourth quarter progressed, slipping to 4.6% year-on-year in December.” Lockdowns are partially to blame, “but China is supposed to be open for business.” So what gives? Well, according to the WSJ Ed Board, “This means a major challenge is looming behind Monday’s good news. Unless China can unlock and expand its productive private economy, it will never be able to manage the burden of the debt Beijing has created to generate Monday’s bump in GDP.” In conclusion, “China’s unbalanced recovery represents an enormous lost opportunity for the Chinese people. It will also eventually present a serious challenge to Mr. Xi or one of his successors.” On the left, Daniel Moss echoes some of the points above in a Bloomberg Opinion piece, saying “China’s recovery from the depth of the COVID-19 slump is impressive, and the country will almost certainly be the only major economic power to end 2020 in positive territory. But for all the superlatives, Beijing is years away from becoming a global economic leader. Moss notes that “Beneath the strong numbers are significant challenges. China’s growth was slowing before the pandemic.” He says their central bank will need to prolong its accommodative stance, “deploying fiscal and monetary loosening,” which means keeping interest rates low and capital cheap. At the same time, Moss says, “injecting too much cash risks further stoking leverage in the financial system,” which could lead to a bubble and subsequent crash. Ultimately, “Too much exuberance now risks a borrowing binge that might end badly.” In summary, the growth looks great at a quick glance. Both sides agree, however, that a large part of the expansion is a result of financial engineering.

person carrying umbrellas

China economy growth will outpace that of other developed nations. Here’s what outlets both at home and abroad are saying about China’s economic figures.

Foreign Publishers: The Editorial Board of the South China Morning Post (SCMP), a Hong Kong-based English-language newspaper owned by Alibaba Group, believes China’s growth is thanks to its ability to contain the virus. The SCMP Ed Board begins by saying “China consolidated its singular bright spot in the world economy with better-than-expected gross domestic product figures for 2020.” They called it “a dramatic turnaround from the early part of the year, including a first-quarter contraction of 6.8 percent, when the coronavirus epidemic resulted in the shutdown of factories.” They note that “other global economies continue to struggle with the pandemic and recession.” Ultimately, they say “The lesson to be learned is that the mainland’s strong recovery can be attributed to the fact that it was the first major economy to bring a massive outbreak of Covid-19 under control.” They say “That objective – whatever it takes – is the key to economic recovery, regardless of the social and economic dislocation and cost at the time. Without it, no matter what various governments are doing to spur recovery, it is unlikely to be effective.” The SCMP Ed Board scolds economies that attempt to open too early saying “Premature relaxation of anti-infection measures, or resistance to the imposition of the most rigorous and effective ones, comes at a high price.” Zooming out they write that “China’s recovery means it will increasingly become the engine of growth at least this year and maybe the next, particularly for many Asian economies.” Towards the end of the article the SCMP Ed Board does note that China’s “recovery still rests on shaky ground.” They point out that China “is also facing the risk of another Covid-19 outbreak” which means “China is far from being out of the woods.” Finally, they also admit that “Chinese consumer spending in December fell short of analysts’ forecasts, raising questions about consumer confidence.”

architectural photograph of lighted city sky

China economy growth will outpace that of other developed nations. Here’s what outlets both at home and abroad are saying about China’s economic figures.

Flag This: According to a poll from Reuters, “China is expected to continue to power ahead of its peers this year, with GDP set to expand at the fastest pace in a decade at 8.4%.” The growth is impressive but sustainability is a question mark, as noted by both sides in the domestic column above. Part of that has to do with a process known as “reshoring” or “or the return of manufacturing activity and jobs into America,” as Al Root notes for Barron’s. “US manufacturing activity is heating up as companies re-evaluate supply chain risk amid geopolitical concerns. Congress, for instance, passed a bill potentially delisting Chinese stocks that don’t meet US audit standards in December. Tariffs, which have roiled global supply chains for the past few years, are also influencing the manufacturing recovery—and reshoring. Tariffs change the math for sourcing low-cost parts from foreign locations. Manufacturing locally is more attractive in an environment with higher and varying tariff levies on imported goods.” This isn’t a US-specific phenomenon either. According to a recent survey from Kyodo News, a nonprofit cooperative news agency based in Minato, Tokyo, “Over 40 percent of Japanese companies the government recognizes as possessing sensitive technology linked to security are shifting their manufacturing bases and sources of parts supplies from China in a bid to diversify their supply chains.” If exports played a key role in boosting China’s GDP, as noted by the WSJ Ed Board, what impact will global reshoring have on this growth driver going forward? It’s too early to tell, but a massive manufacturing move away from China post-pandemic could significantly alter the country’s growth trajectory in the decade ahead.

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