With the slowing down of the growth of China’s trade, fixed-asset investment and consumption in January and February, some people start to doubt China’s ability to reach this year’s growth target of about 7.5 per cent. Some even worry that China is moving closer to a recession or financial and debt crisis, thus putting the global economy at risk.
This reminds me of similar concerns last year in international media that China’s economy would have a “hard landing” or even “collapse.” But it turned out that China’s economy grew by 7.7 per cent in 2013. We not only realized the main targets of economic and social development, but also made obvious progress in economic restructuring. Last year, the service sector increased to 46.1 per cent of China’s economy, surpassing the manufacturing industry for the first time. China also became the world’s largest goods trader and its contribution to global economic growth reached 30 per cent.
It’s only natural for an economy to experience ups and downs. China is no exception. However, with fast development for more than 30 years since the reform and opening up, China’s economy has been well built with vast potential and resilience.
Last year, the Chinese government launched a new round of comprehensively deepening reforms with detailed measures and programs, and the top priority was to leave the market to play the decisive role. Through streamlining administration and deregulation, the government is more efficient to take its due responsibilities of maintaining the stable macro-economy, providing public service, supervising the market and keeping market order.
Meanwhile, the government is reforming the fiscal, tax and financial systems so as to bring down the cost of business financing and facilitate business operation. These measures have tremendously boosted market dynamism and stimulated social creativity as shown in the following statistics: The number of newly registered businesses last year increased by 27.6 per cent, among which private businesses grew by 30 per cent, the highest in more than 10 years.
Consumption will be playing a bigger role in driving China’s economic growth. In the past three years, the contribution rate of consumption to gross domestic product has reached or exceeded 50 per cent, while in 2010 it was merely 37 per cent. Right now, China’s urbanization rate is around 54 per cent and is expected to grow by 1 per cent each year. With tens of millions of people to be relocated to cities, huge spending power will be unleashed. Meanwhile, the deepening reform of the income distribution system and improvement of the social security system will further boost consumer demand. In the first two months of this year, consumption maintained double-digit growth.
Innovation and industrial upgrading have been creating new room for economic growth. In 2013, the output growth of China’s high-tech industries such as information technology, environmental protection and biomedicine was much faster than that of traditional industries. In the past two months, aircraft and spacecraft-related products, environmental protection equipment, pharmaceutical products and e-communication equipment grew by 25.7, 19, 13.3 and 11.5 per cent, respectively. It is estimated that high-tech industries will account for 15 per cent of China’s economy by 2020, up from 4 per cent in 2010.
China’s opening-up is entering a new phase. Foreign investment will have greater access to China’s service and general manufacturing sectors. Since September, the world-class China (Shanghai) Pilot Free Trade Zone has made major progress in transforming government functions, facilitating investment and trade, and reforming financial and legal systems. This pilot zone is becoming a model that can be copied and extended into other parts of China. That will make it possible for China to build an upgraded version of an open economy in much wider areas. I hope that Canadian enterprises do not fall behind in this process.
The slowing down of some economic indexes in the first two months of this year can be largely attributed to the great efforts made by the Chinese government to restructure the economy, eliminate overcapacity and control smog. Furthermore, for China, economic growth in the first two months of each year tends to be relatively slow, so it is inappropriate to predict the whole-year growth with those figures. Compared with other major economies, China’s growth is still at a much faster pace and is, over all, off to a good start. Recently, Forbes magazine carried an article saying that myopia is one of the reasons why China’s growth is often misunderstood in the West.
Zhang Junsai is China’s ambassador to Canada.