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Chinese Economy: 5.5% Growth Rate in Next 5-7 Years

Dec 07-2020   



The Chinese economy had continued its steady recovery, so read the macro-economic figures of the State Statistics Bureau for the month of October 2020. For the whole year, economic growth can be expected to exceed 2%, yet the time is yet to come for an exit of the quantitative easing policy, said Prof. Yao Yang, Dean of the NSD, in a media interview.

 

The timing for withdrawing the quantitative policy hinges on the recovery of the small and medium-sized enterprises (SMEs), explained Prof. Yao. He suggested that only when the PMI crosses into the positive terrain should such a withdrawal be considered.

 

He remained upbeat about the Chinese economy in the near future, expecting it to grow by 8.5-9% next year and 5.5% annually in the next five to seven years. The growth potential can materialize as the economic cycle emerges from the disruptions of the pandemic and picks up the slack.

 

One notable issue with current economic recovery is the disparate performances of large enterprises and their smaller peers. Investment and real estate are among the major driving forces for economic recovery, mostly benefiting large enterprises. The PMI for small enterprises slid by 0.7% to 49.4% in October - technically inside the contraction zone. Still, in dire need of liquidity, the SMEs would be dealt a deadly blow if quantitative easing was phased out now, argued Prof. Yao.

 

Another unnerving sign of the recovery is the lackluster consumption, which lags miles behind the demand side in bouncing back. Under the background that around 600 million Chinese citizens earn 1,000 yuan per month, the 14th Five-Year Plan lays out the goal of significantly expanding the middle-income group. The growth of the service industry has contributed to a better income-distribution pattern and will continue to absorb more workers; meanwhile, the manufacturing industry should be equally prioritized to maintain its share in overall economic output and enhance its capability in generating higher income for workers.

 

Externally, as the US enters the Joe Biden era, the Sino-US relations still have room for cooperation. What China should do is to make good use of such cooperation and drive the Sino-US rivalry in a more rational and ruled-based direction.

 

Chinese Economy: 5.5% Growth Rate in Next 5-7 Years

Dec 07-2020   



The Chinese economy had continued its steady recovery, so read the macro-economic figures of the State Statistics Bureau for the month of October 2020. For the whole year, economic growth can be expected to exceed 2%, yet the time is yet to come for an exit of the quantitative easing policy, said Prof. Yao Yang, Dean of the NSD, in a media interview.

 

The timing for withdrawing the quantitative policy hinges on the recovery of the small and medium-sized enterprises (SMEs), explained Prof. Yao. He suggested that only when the PMI crosses into the positive terrain should such a withdrawal be considered.

 

He remained upbeat about the Chinese economy in the near future, expecting it to grow by 8.5-9% next year and 5.5% annually in the next five to seven years. The growth potential can materialize as the economic cycle emerges from the disruptions of the pandemic and picks up the slack.

 

One notable issue with current economic recovery is the disparate performances of large enterprises and their smaller peers. Investment and real estate are among the major driving forces for economic recovery, mostly benefiting large enterprises. The PMI for small enterprises slid by 0.7% to 49.4% in October - technically inside the contraction zone. Still, in dire need of liquidity, the SMEs would be dealt a deadly blow if quantitative easing was phased out now, argued Prof. Yao.

 

Another unnerving sign of the recovery is the lackluster consumption, which lags miles behind the demand side in bouncing back. Under the background that around 600 million Chinese citizens earn 1,000 yuan per month, the 14th Five-Year Plan lays out the goal of significantly expanding the middle-income group. The growth of the service industry has contributed to a better income-distribution pattern and will continue to absorb more workers; meanwhile, the manufacturing industry should be equally prioritized to maintain its share in overall economic output and enhance its capability in generating higher income for workers.

 

Externally, as the US enters the Joe Biden era, the Sino-US relations still have room for cooperation. What China should do is to make good use of such cooperation and drive the Sino-US rivalry in a more rational and ruled-based direction.