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Chinese Economy Needs to Rise above Major Challenges

May 26-2022   



In the recent Cheng Ze Forum, Prof. Justin Yifu Lin said that China should ensure economic growth and opening up to cope with international challenges, and focus on reversing weak expectations and eradicating lazy governance to surmount domestic plights.

 

The forum centered around China and the West, a new book jointly edited by Prof. Lin and Jan Svejnar of Columbia University. Prof. Lin is Honorary Dean of the NSD and Dean of Institute of New Structural Economics and Institute of South-South Cooperation and Development, both at PKU.

 

New challenges have waxed internally and externally, said Prof. Lin. On the international front, Joe Biden, while continuing his predecessor Trump’s China policy featuring trade and tech wars, has escalated efforts to build so-called democratic alliances with an attempt to isolate China politically and incite some countries to decouple from China economically. In addition, the war between Russia and Ukraine has pushed up the prices of oil, grain, ad some mineral resources, of which China is an importer. In the mid- and long-term, some forces might attempt to use the war as a disguise to sow discord in China-EU relations.

 

Domestically, the Chinese economy has been on a slide since the third quarter of 2021, due to shrinking demand, supply chain shocks, and weakening expectations. The Omicron wave of the pandemic, starting in March, has further dampened the situations, making the 5.5% growth target harder to reach, noted Prof. Lin.

 

For China to rise above external challenges, the best solution lies in maintaining fast growth and expanding opening up, which will attract countries to work with China and benefit from China’s development, suggested Prof. Lin. Since 2008, China has been contributing 20-30% of global economic growth annually, a proportion so significant that, if sustained into the future, will persuade many countries to stay away from the decoupling-from-China trap set by the US. On the Russia-Ukraine war, Prof. Lin said that China should continue to uphold its position, namely calling for peace and advocating diplomacy to resolve conflicts. China and European countries don’t have geopolitical issues and thus should avoid having their trade relations disrupted, said Prof. Lin.

 

As for domestic challenges, Prof. Lin highlighted problems on the implementation level that have weakened expectation. Some mid- and long-term policies, such as Common Prosperity, have been short-termized, localized and fragmented, resulting in composite fallacies that have sapped confidence. While such challenges might persist into the mid- and long run, the most immediate task is to deal with the pandemic in a scientific and effective way. Prof. Lin deplored such lazy governance as prohibiting farmers to work on their fields, which he believed might strain food security and threaten social stability. Moreover, after achieving dynamic zero-case, local governments should move fast to bring production and life back to normal. Measures such as tax reduction and exemption should be granted to companies, and assistance should be provided to individuals and families.

 

Chinese Economy Needs to Rise above Major Challenges

May 26-2022   



In the recent Cheng Ze Forum, Prof. Justin Yifu Lin said that China should ensure economic growth and opening up to cope with international challenges, and focus on reversing weak expectations and eradicating lazy governance to surmount domestic plights.

 

The forum centered around China and the West, a new book jointly edited by Prof. Lin and Jan Svejnar of Columbia University. Prof. Lin is Honorary Dean of the NSD and Dean of Institute of New Structural Economics and Institute of South-South Cooperation and Development, both at PKU.

 

New challenges have waxed internally and externally, said Prof. Lin. On the international front, Joe Biden, while continuing his predecessor Trump’s China policy featuring trade and tech wars, has escalated efforts to build so-called democratic alliances with an attempt to isolate China politically and incite some countries to decouple from China economically. In addition, the war between Russia and Ukraine has pushed up the prices of oil, grain, ad some mineral resources, of which China is an importer. In the mid- and long-term, some forces might attempt to use the war as a disguise to sow discord in China-EU relations.

 

Domestically, the Chinese economy has been on a slide since the third quarter of 2021, due to shrinking demand, supply chain shocks, and weakening expectations. The Omicron wave of the pandemic, starting in March, has further dampened the situations, making the 5.5% growth target harder to reach, noted Prof. Lin.

 

For China to rise above external challenges, the best solution lies in maintaining fast growth and expanding opening up, which will attract countries to work with China and benefit from China’s development, suggested Prof. Lin. Since 2008, China has been contributing 20-30% of global economic growth annually, a proportion so significant that, if sustained into the future, will persuade many countries to stay away from the decoupling-from-China trap set by the US. On the Russia-Ukraine war, Prof. Lin said that China should continue to uphold its position, namely calling for peace and advocating diplomacy to resolve conflicts. China and European countries don’t have geopolitical issues and thus should avoid having their trade relations disrupted, said Prof. Lin.

 

As for domestic challenges, Prof. Lin highlighted problems on the implementation level that have weakened expectation. Some mid- and long-term policies, such as Common Prosperity, have been short-termized, localized and fragmented, resulting in composite fallacies that have sapped confidence. While such challenges might persist into the mid- and long run, the most immediate task is to deal with the pandemic in a scientific and effective way. Prof. Lin deplored such lazy governance as prohibiting farmers to work on their fields, which he believed might strain food security and threaten social stability. Moreover, after achieving dynamic zero-case, local governments should move fast to bring production and life back to normal. Measures such as tax reduction and exemption should be granted to companies, and assistance should be provided to individuals and families.