Contrary to what the critics say, China will be just fine
China Go SmartChina Go Smart
<http://chinagosmart.com/profile/chinagosmart>Jan 30, 2019
21
http://chinagosmart.com/contrary-to-what-the-critics-say-china-will-be-just-fine
After their “coming collapse” theory failed to materialize for over 30
years, China critics seem to think they are vindicated by the latest GDP
numbers. Having registered only 6.6% growth in 2018, the lowest rate in
28 years, critics are quick to say, “I told you so.”
They opine that China’s economy will be heading to a hard landing
because of “hidden huge debts,” which they estimated at over 300% of
GDP. The critics also claim the ongoing US-China trade war has closed
many factories. The “proof” is the gradual decline of China’s quarterly
GDP growth rates in 2018: 6.8%, 6.7%, 6.5% and 6.4% in the first,
second, third and fourth quarters, respectively.
Must-reads from across Asia - directly to your inbox
*Are the critics right?*
Whether the China critics are right or not, one should examine the
claims and economic realities on the ground.
As alluded to earlier, the Western media and pundits have been repeating
the “drown in a sea of debt” message for over 30 years. The US-based
lawyer Gordon Chang wrote in his 2001 book/The Coming Collapse of
China/that its economy would collapse in 2011 for the same reason. The
world knows what happened to their theory.
Peterson Institute for International Economics analyst Nicholas Lardy
wrote in the January 16 edition of the Financial Times that Chinese
President XI Jinping’s decision to roll back reforms culminated in a
total debt-GDP ratio of over 300% in 2018. He claimed that over 20% of
state-owned enterprises (SOEs) went out business, requiring substantial
bailouts by state-owned banks (SOBs).
The Chinese economy has not only defied its critics but, in fact,
performs better than the US and its G7 allies. According to the
International Monetary Fund (IMF), the US, EU, and Japan GDP growth
rates were 3.0%, 2.1% and 1%, respectively in 2018. The IMF further
estimates that the G7 nations’ growth rates will be slower in 2019, at
2.3%, 1.9% and 0.5%, respectively, for the US, EU and Japan. Whereas
China’s growth rate is expected to be between 6.2% and 6.4% in the same
year.
Other data on the Chinese economy discredit the “coming collapse” theory.
*Chinese key economic indicators*
In 2018, Chinese total debt to GDP was 266%, according to the US-based
financial media service Bloomberg whereas those of the US, EU and Japan
were, respectively, over 310% and 307.0%. When taking external debt to
GDP into consideration, China’s 15% versus the average G7 country’s
156%, its financial posture is in even better shape, according to
Wikipedia. China’s debt is largely internal.
According to the China National Bureau of Statistics (CNBS), SOE debt
totaled US$17 trillion (125% of GDP) in 2018. The total corporate
debt-GDP ratio is approximately 156%, and since SOEs borrow from SOBs,
the lending-borrowing arrangement is a “family affair.” It is more of an
accounting issue than a debt burden one.
CNBS also indicates that SOEs posted almost US$500 billion in profits in
2018, a year-on-year rise of 12.9%. This picture hardly points to a
“financial bubble.” What’s more, in order for the financial system to
collapse, all SOEs must default on payments, a highly unlikely scenario.
It should also be pointed out that China’s total bank assets are over
$37 trillion, the largest in the world according to the China Banking
Regulatory Commission (CBRC). With over $26 trillion in bank deposits
and over $3 trillion in foreign exchange reserves, China could withstand
any financial or economic problems.
Without exception, China’s economic performance outshines that of the US
and its G7 allies. According to the CNBS, Chinese wages, consumption and
employment rose by 6.5%, 6.2% and 13.6 million new jobs, respectively,
in 2018. Nominal wages in the US increased by 2.7% but inflation was
2.9% in 2018, according to the US Department of Labor. The EU and
Japanese figures are equally bleak.
The low wage increases coupled with high consumer debt to income explain
why private consumption increased only marginally in the G7, estimated
at less than 1% by the IMF. Since private consumption accounts for over
70% of GDP in the G7, the club would likely find it extremely difficult
to climb out of the hole that the US-engineered 2008 financial crisis
had dug.
*China’s economy is not collapsing anytime soon*
Unless the Chinese economic statistics are “fake” or the critics know
something the rest of us don’t, there is no reason to believe that
China’s economy will collapse anytime soon. Indeed, one could argue it
will likely remain the “beacon” of the world economy, continuing to
contribute over 30% of global economic growth as the biggest trade
partner of 130 countries.
Contrary to charges of “predatory economic” practices or setting up
“debt traps” for developing economies, increasing numbers of countries
in both the developed and developing worlds are participating in China’s
highly successful Belt and Road Initiative (BRI). According to the China
General Customs Commission, over 80 countries have joined the BRI with a
total investment of over $180 billion and$ 5 trillion in two-way trade
since its inception in 2013.
China’s huge domestic market of 1.4 billion people, of whom over 400
million are middle class (defined as anyone earning between US$12,000
and $72,000 a year), offers foreign investors tremendous opportunities.
This probably explains why most nations, including staunch US allies
such as Japan and the EU, are seeking rapprochement with “commie China.”
Contrary to US media claims, only a handful of countries are joining
(pressuring more likely) it in banning Huawei from their
telecommunications architectures. These countries – Australia, New
Zealand, Britain, Canada, Germany, and Japan – will find it difficult to
find alternative suppliers because the Chinese telecom company produces
or has patented the 5G parts. What’s more, switching fro Huawei to other
sources would delay 5G implementation and cost these companies billions
of US dollars.
Since there is no evidence to prove that Huawei is guilty of the US
spying charges, the US is dragging its allies down the road of disaster.
*A comment*
The US and other China bashers should do their citizens a favor: stop
inventing “fake news” to demonize or belittle the Asian giant. China is
not going anywhere unless there is a nuclear war that would also destroy
the US and its allies.
Proclaiming 3.0% growth in the US is a “miracle” while saying China’s
6.6% constitutes collapse is twisted logic.
Asia Times is not responsible for the opinions, facts or any media
content presented by contributors. In case of abuse,click here to report
<http://www.atimes.com/abuse/?post_id=305560>.
Ken Moak taught economic theory, public policy and globalization at
university level for 33 years. He co-authored a book titled China's
Economic Rise and Its Global Impact in 2015. HIs second book, Developed
Nations and the Economic Impact of Globalization, was just published by
Palgrave McMillan Springer.
---
此電子郵件已由 AVG 檢查病毒。
http://www.avg.com
