— Doom and gloom abounds in the international media, but China’s economy keeps on going

As the world’s second largest economy, China is sure to bear a greater influence over the international community regardless of its economic growth rate. In a recent series of interviews with the People’s Daily, most overseas officials and economic observers refuted widespread pessimism about the Chinese economy. As China undergoes a crucial restructuring period, it will continue to outperform the naysayers’ expectations, they said.

False alarm

Stephen Roach, a Senior Fellow at Yale University’s Jackson Institute of Global Affairs, told People’s Daily that some media punditocracy has once again succumbed to the “China Crash” syndrome - a malady that seems to afflict economic and political commentators every few years.

Far from crashing, the Chinese economy is at a pivotal point. The wheels of rebalancing are turning, which will continue to generate impetus for China’s economic growth, said Roach.

Roach said that recent bearishness surrounding China’s growth is just another “false alarm” and investors are focusing on the wrong data points to assess the economic outlook. Roach argues that industry watchers should quell their obsession with gross domestic product (GDP) figures for China, and instead focus on consumption data, which he says is a better measure of an economy in the midst of rebalancing. “The composition of GDP is probably the worst metric to use in assessing early-stage progress on economic rebalancing,” said Roach. “Eventually, of course, the mix of GDP will provide the acid test of whether China has succeeded. But the key word here is ‘eventually.’”

Rajiv Biswas, Chief Asian economist at IHS Global Insight, an analysis and consulting agency in the United States, said to People’s Daily that the predictions of China’s economic downturn cannot hold water. Actually, HIS Global Insight forecasts that the Chinese economy will continue to see relatively rapid growth and it is expected to surpass the U.S. as the world’s largest economy by 2021. With its robust economic growth, China’s influence in Asia is continually on the rise. China could become the largest trading partner of most countries in the Asia-Pacific region in the near future.

Biswas said that although demand for Chinese exports is weakening while a number of key industries such as steel are at overcapacity, China’s economic growth is expected to expand by 7.5 percent in 2013 due to strong consumer confidence as well as the supporting policy announced recently by the Chinese Government. China is currently undergoing significant interim structural reforms to improve its economic competitiveness. These reforming initiatives--including financial reform, curbing the overcapacity of certain industries, boosting domestic consumption as well as reducing dependence on exports--will be very helpful for promoting the sustainable development of China’s economy.

A bright prospect

Yukon Huang, a senior associate in the Asia Program of the U.S.-based Carnegie Endowment for International Peace, told People’s Daily that with the maturing of China’s economic development, China is on a prolonged path from double-digit growth rates to a relatively slow but more sustainable growth rate, which is more suitable for the development of an upper-middle income country. Thus, while China’s GDP growth rate has dropped to 7.5 percent, it should not be a cause of concern. The real challenge will be to maintain a growth rate around 7 percent throughout the last few years of the decade, which is a key factor to ensure China becomes a more prosperous country.

Nicholas Lardy, a China expert at the Peterson Institute for International Economics in Washington, said that in the past 30 years, outside observers have warned and predicted that accumulating problems may hinder China’s economic growth. There were indeed some ups and downs on the road of China’s economic development, but the country remained steady. The main reason for this stability is that the policies and measures of the Chinese Government always focus on resolving those potential problems. Though the effect might be not good enough or fast enough, it is adequate to maintain a reasonable economic growth.

In an interview with People’s Daily, Chokedee Kaewsang, Deputy Secretary General of Thailand Board of Investment (BOI), told reporters that China’s economic slowdown in the second-quarter of 2013 does not mean a recession. He said the slowdown is due to the country’s ongoing economic reforms. The Chinese Government is focused more on economic restructuring and the shifting of the growth pattern, which will promote the sustained and healthy development of the economy. Meanwhile, China’s direct investment in Thailand was not affected. In the first half of 2013, the investment applications of Chinese enterprises submitted to the BOI have increased by 37 percent over the same period of last year. China and Thailand have also vowed to increase bilateral trade volume to $100 billion by 2015.

Effective structural adjustment

Roach said it is much more important to examine trends in the potential determinants of Chinese consumption. There is good reason for optimism, especially given the accelerated growth in China’s service sector, one of the key building blocks of a consumer-led rebalancing. In the first half of 2013, services output (the tertiary sector) expanded by 8.3 percent year on year, markedly faster than the combined 7.6 percent growth of manufacturing and construction (the secondary sector). “An increasingly services-led economy is encouraging, and the output growth of the service sector has surpassed the first industry, which shows that the Chinese economy is changing its growth pattern from the last 20 years.” He believes that greater reliance on services will allow China to settle into a lower and more sustainable growth trajectory.

Kaewsang said firmly that he does not think there will be a hard landing for the Chinese economy. Despite the increase of debt of government and corporate sector will lead to a rising leverage ratio, the size is still manageable. He attributed the recent criticism of the Chinese economy to observers’ abundant double-counting of these social financing data. And in fact, the rising speed of the leverage ratio is not as swift as these data reflects.

Liang Guoyong, an economic affairs officer at the UNCTAD’s Investment and Enterprise Division, said to People’s Daily that his overall judgment of the Chinese economy is positive. Considering the external economic environment after the international financial crisis, particularly the European debt crisis in the past two years, China’s macro economy is still outperforming. The Chinese economy has become a decisive force in the world’s economic stabilization and recovery.

Liang said that compared with other economies, China’s economy is still performing excellently. The recovery of major developed economies is still weak. Although Chinese economic growth has slowed, it still remained at a relatively high growth rate of above 7 percent. Moreover, there are still a lot of growth points as well as growth potential for the economy. Meanwhile, compared with the growth plunging and financial volatility of Brazil, India and other emerging economies, the economic situation in China is much better.

Countries in the ASEAN community such as Thailand are very concerned about China’s economic situation. Recently, the mainstream newspaper Bangkok Post ran a special report on China’s economic slowdown. The report said the slowing growth in the second quarter of this year does not indicate an impending collapse of the Chinese economy. In fact, China’s economic slowdown was mainly due to external and cyclical factors. Since the financial crisis in 2008, international demand dropped significantly due to economic weakness in developed countries, and many fast-growing emerging economies have also been affected. The Chinese Government has the capacity to adopt counter-cyclical fiscal policies to maintain a growth rate of 7.5 percent. Moreover, China has a relatively high savings rate in the private and public sectors. Together with its large foreign exchange reserves, there is enormous growth potential in upgrading both in terms of industrialization and infrastructure.