Coming into Land
- By Yu Nan
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ChinAfrica, November 28, 2011
"While the global economy is troubled by debt crises and speculation concerning a double-dip recession, the central bank's decision to raise interest rates makes it clear that taming inflation remains a top priority, even as the economic growth pace gently eases," Fan said.
This was also reflected in a recent article written by Premier Wen Jiabao. The premier reiterated that stabilizing prices was China's top priority, and that China's "macro-regulation and adjustment direction cannot be changed." The article was published on the issue No.17 of Qiushi, or Seeking Truth, the Party's flagship magazine.
"Cooling down is conducive to correct relations between market supply and demand, reduces price-hike pressure, and relieves resources and environmental restraints," Li of NDRC added.
Restructuring ahead
China's economic problems are not serious enough to lead to a "lost decade," yet analysts believe that a must-do task for the country is to push ahead its economic restructuring to avoid a possibility of suffering a hard landing.
After decades of export-driven growth, it is hard to see that a continued reliance on external demand will work for China in the next few years, as China's trade-to-GDP ratio and exports-to-GDP ratio already respectively exceeded 60 percent and 30 percent, according to Yu of the China Society of World Economics.
Yu, also a former member of the Monetary Policy Committee of the PBOC, was quoted in his article warning that "China has reached a crucial juncture: without painful structural adjustments, the momentum of its economic growth could suddenly be lost."
The good news is that China has become less reliant on export growth, as the trade surplus narrowed by 8.7 percent year-on-year to $76.2 billion in the first seven months, the customs data said.
Meanwhile, the PMI's sub index of new export orders in August decreased to 48.3 from 50.4 in July, indicating a contraction for the first time since May 2009, according to the CFLP.
Analysts said that the rapid decline in the export order index may signal a downturn in exports during the coming months, due to a predicted lower demand from the Euro zone and the United States as they battle with potential debt crises.
However, some see opportunities in the crises.
China should catch the opportunity to transform its development mode from one orientated toward export demand, to one led by domestic demand, said Harvard University Professor Dale Jorgenson, adding that the U.S. debt crisis will further depress demand for Chinese exports.
"The financial crisis has taught us that what happens in one nation has impacts on regions and others further afield," said economist Jeremy Stevens from Standard Bank in South Africa. "As the world's largest exporter and second largest importer, China is certainly more externalized than ever before. Hence, global macroeconomic weakness will inevitably erode and undermine organic economic activity in the country," he told ChinAfrica.
Stevens also said China will be affected by what is going on globally, but he is not expecting a hard landing.
Guo Shuqing, Chairman of China Construction Bank, echoes his comment. Guo was quoted as saying in an interview with Economy & Nation Weekly that the country is still facing many challenges, such as an unbalanced and unsustainable domestic development. However, the economy will keep sound growth, as long as "China makes concrete efforts to rebalance its economic growth in the future, improving the relations between quality and quantity, structure and efficiency," he said.
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