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Yao Yang: Chinese Economy Springs Forward

Sep 29-2022   



In his recent speech at a forum, Prof. Yao Yang, Dean of both BiMBA and the NSD, highlighted the resilience of the Chinese economy in the mid and long run and offered advice on measures to address short-term challenges.

 

Contrary to certain cacophony, facts and statistics are clearly pointing to a reinforcement in the connections between China and the rest of the world, he said. China has seen its share of the global trade rise from 11% before the pandemic to 14% currently and that with major countries from 14% to 17%. By adopting a principled neutral attitude with regard to the Russia-Ukraine conflicts, China has demonstrated sound moral responsibility and benefited from the economic realities. As Europe works to wean itself off Russian energy, it has ramped up imports of solar panels from China because the latter has mastered core technologies in solar and wind power over the last two decades. As far as the US is concerned, its trade deficit with China has been on steady increase since 2020, reaching USD242.7 billion in the first seven months of this year. In addition, the tech de-coupling enforced by the US government has had limited impact on China so far. As scientific knowledge knows no national borders, Prof. Yao believed that academic exchanges and knowledge sharing between the two countries will not be cut off.

 

The resilience of the Chinese economy also lies in the fact that innovation has become a new driving force for China’s economic growth and some Chinese industries are starting to lead the world. Prof. Yao reckoned that the last decade has witnessed the budding and blooming of ‘invisible champions’ in such fields as AI technology, new energy, and electric cars, among others. For example, China has an overwhelming advantage in renewable energy, accounting for half of the world’s wind and solar power generation capacity. In new-energy cars, China might be on way to become a major global player and repeat the feat of Japan in the 1980s. Though some industries are relocated to countries like Vietnam, China has moved up the value chains and thus benefiting from exporting high-added-value intermediate goods and importing lower-added value ones such as clothing.

 

In the short run, China needs to tackle some thorny issues such as the slump in consumption, investment and real estate. Pandemic remains a hindrance, but the policy needs to be retooled to strike a finer balance between economic growth and pandemic control. To spur consumption, Prof. Yao advocated giving cash or coupons to households with the money raised from ad-hoc consumption treasury bonds. Per real estate, he cautioned against over-stressing the negative impacts of the industry and advised the government to purchase 1% of the shares of real estate firms, thereby injecting confidence into banks and home buyers.

 

Yao Yang: Chinese Economy Springs Forward

Sep 29-2022   



In his recent speech at a forum, Prof. Yao Yang, Dean of both BiMBA and the NSD, highlighted the resilience of the Chinese economy in the mid and long run and offered advice on measures to address short-term challenges.

 

Contrary to certain cacophony, facts and statistics are clearly pointing to a reinforcement in the connections between China and the rest of the world, he said. China has seen its share of the global trade rise from 11% before the pandemic to 14% currently and that with major countries from 14% to 17%. By adopting a principled neutral attitude with regard to the Russia-Ukraine conflicts, China has demonstrated sound moral responsibility and benefited from the economic realities. As Europe works to wean itself off Russian energy, it has ramped up imports of solar panels from China because the latter has mastered core technologies in solar and wind power over the last two decades. As far as the US is concerned, its trade deficit with China has been on steady increase since 2020, reaching USD242.7 billion in the first seven months of this year. In addition, the tech de-coupling enforced by the US government has had limited impact on China so far. As scientific knowledge knows no national borders, Prof. Yao believed that academic exchanges and knowledge sharing between the two countries will not be cut off.

 

The resilience of the Chinese economy also lies in the fact that innovation has become a new driving force for China’s economic growth and some Chinese industries are starting to lead the world. Prof. Yao reckoned that the last decade has witnessed the budding and blooming of ‘invisible champions’ in such fields as AI technology, new energy, and electric cars, among others. For example, China has an overwhelming advantage in renewable energy, accounting for half of the world’s wind and solar power generation capacity. In new-energy cars, China might be on way to become a major global player and repeat the feat of Japan in the 1980s. Though some industries are relocated to countries like Vietnam, China has moved up the value chains and thus benefiting from exporting high-added-value intermediate goods and importing lower-added value ones such as clothing.

 

In the short run, China needs to tackle some thorny issues such as the slump in consumption, investment and real estate. Pandemic remains a hindrance, but the policy needs to be retooled to strike a finer balance between economic growth and pandemic control. To spur consumption, Prof. Yao advocated giving cash or coupons to households with the money raised from ad-hoc consumption treasury bonds. Per real estate, he cautioned against over-stressing the negative impacts of the industry and advised the government to purchase 1% of the shares of real estate firms, thereby injecting confidence into banks and home buyers.