Long-term policy reflects responsible leadership
- By Dan Steinbock
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E-mail China Daily, February 23, 2016
Third, a hard landing indicates a sharp slowdown in economic growth, if not outright recession. Yet, China's growth remains between 6.5 and 7 percent, more than four times as high as the eurozone's and almosecot three times higher than the US.
Finally, a hard landing is predicated on a business cycle. However, China's growth deceleration is fueled by the government's rebalancing efforts. The shift from unsustainable growth based on investment and net exports to consumption and innovation is about structural transformation, not just business cycles.
After the global financial crisis, China, thanks to its huge stimulus package, accounted for more than 50 percent of the global GDP growth from 2009 to 2010. It was an extraordinary contribution that spared the international economy from a 21st century replica of the 20th century's Global Depression. But in the future, the mainland will not be able to "bail out" global growth in a similar way.
At that time, China's GDP was less than 10 percent and its population about 20 percent of the total world population. Today, China accounts for about 25 percent of world GDP growth, which is closer to its share in the world economy. In the coming decade, China has the potential to grow two to three times faster than major advanced economies, as long as market-oriented structural reforms prevail.
Today, the US, Europe and Japan continue to take debt, have zero-bound interests or persist in new rounds of quantitative easing. In contrast, China's government is engaged in a structural transformation, even as it is deleveraging. After two to three years, that could result in a reform dividend.
That's a purposeful long-term policy, which reflects responsible economic leadership that should inspire the advanced West.
The author is the founder of Difference Group and has served as research director at the India, China and America Institute (US) and is visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore).
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