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Prof. Yao Yang: The World Relies More on China as the Country Undergoes Profound Economic Adjustments

Jun 21-2024   



A baffling disconnect seems to have arisen: on one hand, the Chinese economy has demonstrated good momentum, catching up and even taking lead in many fields; on the other hand, confidence seems less than solid and parts of the economy eludes comprehension. On this topic, Prof. Yao Yang of the NSD offered his analysis at a recent event by The Economic Observer, a media group.

 

He rebutted pessimistic views on the international environment, pointing out that the so-called decoupling strays from real-world statistics. On the contrary, the world has come to rely even more on China. After covid, China’s share of the global export rose to 14%, up from pre-pandemic 12%. In the first five months of 2024, China’s export expanded by 7%, to USD2.8 trillion. US trade data showed that its import from China dropped by 17%, but a deeper look revealed that the figure, if accounting for products made by Chinese firms in Southeast Asian countries, Mexico and some others, actually went up. Prof. Yao stressed the importance of grasping the current round of global industrial division of work and cooperation and of steering away from social Darwinian tendencies. On the issue of ‘technology choke-hold’, Prof. Yao said that it will result in dual-losses for the US as China is jolted into chip-making and becoming part of the global league in frontier technologies such as AI, new energy, and new energy cars.

 

On the domestic economy, Prof. Yao believed it has entered a phase of profound adjustments, which since 2010 has spanned decreasing reliance on export, elimination of excessive capacity, industrial upgrading, and development of new-quality productive forces. Since 2018, one major aspect has been the lowering of financialization across the whole society in a bid to avert industrial hollowing. As the real estate industry undergoes de-financialization and local governments strive to reduce debts, some industries are put in a straitjacket, hence the uncomfortable feelings of some.

 

Don’t expect dramatic policies to be rolled out for the real estate industry and local debts, said Prof. Yao, as the resolution is firmly in place to develop a healthier economy in the long run at the expense of short-term angst. He estimated that about one billion square meters of housing (including affordable one) will be sold annually from this year onwards, a far cry from 1.8 billion square meters in 2021. Local governments, though facing a tight fiscal situation, still need to slash current debt stock and control new debts, so as to stay in line with the goals of current economic adjustments.

 

Technology is becoming the game-changer in future global competition, so investments should be made to ensure technological advancement and the sustainable competitiveness of the manufacturing sector, said Prof. Yao. At the same time, residential consumption needs to be ramped up. The complexity of the economy lies in the imperative to maintain a certain level of economic growth while pushing forward profound adjustments and increasing tech investments to get prepared for global competition.

 

 

Prof. Yao Yang: The World Relies More on China as the Country Undergoes Profound Economic Adjustments

Jun 21-2024   



A baffling disconnect seems to have arisen: on one hand, the Chinese economy has demonstrated good momentum, catching up and even taking lead in many fields; on the other hand, confidence seems less than solid and parts of the economy eludes comprehension. On this topic, Prof. Yao Yang of the NSD offered his analysis at a recent event by The Economic Observer, a media group.

 

He rebutted pessimistic views on the international environment, pointing out that the so-called decoupling strays from real-world statistics. On the contrary, the world has come to rely even more on China. After covid, China’s share of the global export rose to 14%, up from pre-pandemic 12%. In the first five months of 2024, China’s export expanded by 7%, to USD2.8 trillion. US trade data showed that its import from China dropped by 17%, but a deeper look revealed that the figure, if accounting for products made by Chinese firms in Southeast Asian countries, Mexico and some others, actually went up. Prof. Yao stressed the importance of grasping the current round of global industrial division of work and cooperation and of steering away from social Darwinian tendencies. On the issue of ‘technology choke-hold’, Prof. Yao said that it will result in dual-losses for the US as China is jolted into chip-making and becoming part of the global league in frontier technologies such as AI, new energy, and new energy cars.

 

On the domestic economy, Prof. Yao believed it has entered a phase of profound adjustments, which since 2010 has spanned decreasing reliance on export, elimination of excessive capacity, industrial upgrading, and development of new-quality productive forces. Since 2018, one major aspect has been the lowering of financialization across the whole society in a bid to avert industrial hollowing. As the real estate industry undergoes de-financialization and local governments strive to reduce debts, some industries are put in a straitjacket, hence the uncomfortable feelings of some.

 

Don’t expect dramatic policies to be rolled out for the real estate industry and local debts, said Prof. Yao, as the resolution is firmly in place to develop a healthier economy in the long run at the expense of short-term angst. He estimated that about one billion square meters of housing (including affordable one) will be sold annually from this year onwards, a far cry from 1.8 billion square meters in 2021. Local governments, though facing a tight fiscal situation, still need to slash current debt stock and control new debts, so as to stay in line with the goals of current economic adjustments.

 

Technology is becoming the game-changer in future global competition, so investments should be made to ensure technological advancement and the sustainable competitiveness of the manufacturing sector, said Prof. Yao. At the same time, residential consumption needs to be ramped up. The complexity of the economy lies in the imperative to maintain a certain level of economic growth while pushing forward profound adjustments and increasing tech investments to get prepared for global competition.