1. LINE

      Text:AAAPrint
      Voices

      The sky is not falling on China's economy

      1
      2015-09-30 09:43China Daily Editor: Wang Fan

      With the bursting of the Chinese stock market bubble in July and the slight but unexpected depreciation of the renminbi, by about 4 percent in August, the world markets have panicked and doomsayers are coming out in droves to predict the imminent collapse of the Chinese economy. But the Chinese economy should be able to make a smooth transition to a "new normal", with an average annual growth rate of about 7 percent over the next few years, based once again on China's domestic demand.

      The current "crisis" was a "crisis" of domestic and international confidence, caused by the slowdown of China's industrial sector and economic events such as the bursting of the stock market bubble and the attempted refinement of the foreign exchange trading mechanism.

      Despite everything, it is unlikely that the Chinese economy will suffer a "hard landing", because the large and widespread excess production capacities in China's manufacturing industries will ensure aggregate supply so long as there is aggregate demand. Thus, the Chinese economy is not supply-constrained.

      Given the excess manufacturing capacities in many industries and the excess supply of residential units in almost all except the very first-tier cities, private-sector fixed assets investment is not likely to be a robust source of increase for aggregate demand as it once used to be. Lowering the rate of interest alone is not going to induce additional private-sector fixed investment in either manufacturing or residential housing. Nor is export likely to be a source of increase of aggregate demand, given the relatively slow recovery of the U.S. and European economies, the continuing rise in wages in China and the significant appreciation of the renminbi since 2005 (about 25 percent). The 4 percent depreciation of the renminbi in August was too small to have any significant impact.

      Moreover, it is really not in the best interests of China to devalue the renminbi enough to go back to labor-intensive light manufacturing such as toy-making, with the low standard of living that such activities imply. It is far more important, from China's point of view, to continue the process of internationalizing the renminbi, so that it can be directly used for the invoicing, clearing and settlement of global transactions. For this purpose, the renminbi exchange rate vis-à-vis the U.S. dollar must be kept at a stable level.

      Chinese household consumption has been growing about 50 percent faster than real GDP during the past few years. But because of its low share in GDP, about 30 percent in 2014, it will not sufficiently boost aggregate demand to make a material difference as yet. Total final consumption, which includes both household consumption and government consumption, reached 60 percent of GDP in the first half of 2015. For household consumption to become a major driver of aggregate demand, real household disposable income must increase significantly faster than real GDP. Even then, it will take a while before household disposable income exceeds 50 percent of GDP.

      Thus, in the short and medium terms, any significant growth in aggregate demand must come from investment in public infrastructure and commodity consumption. The government is expected to take the lead in both. Increasing investment in public infrastructure and commodity consumption to boost aggregate demand at this juncture has two additional advantages.

      First, given the idle manufacturing capacities, the marginal social cost of investment in public infrastructure and commodity consumption is low. Second, the provision of public goods amounts to a redistribution of real income in kind, since, for example, both the rich and the poor breathe the same air and drink the same water. So, the move can reduce the degree of income disparity in China.

      The author, Flawrence J. Lau, is a professor of economics at the Chinese University of Hong Kong.

        

      Related news

      MorePhoto

      Most popular in 24h

      MoreTop news

      MoreVideo

      News
      Politics
      Business
      Society
      Culture
      Military
      Sci-tech
      Entertainment
      Sports
      Odd
      Features
      Biz
      Economy
      Travel
      Travel News
      Travel Types
      Events
      Food
      Hotel
      Bar & Club
      Architecture
      Gallery
      Photo
      CNS Photo
      Video
      Video
      Learning Chinese
      Learn About China
      Social Chinese
      Business Chinese
      Buzz Words
      Bilingual
      Resources
      ECNS Wire
      Special Coverage
      Infographics
      Voices
      LINE
      Back to top Links | About Us | Jobs | Contact Us | Privacy Policy
      Copyright ©1999-2018 Chinanews.com. All rights reserved.
      Reproduction in whole or in part without permission is prohibited.
      主站蜘蛛池模板: 亚洲视频在线不卡| 亚洲av激情无码专区在线播放| 亚洲人成网站18禁止久久影院| A毛片毛片看免费| 亚洲中文字幕无码中文字在线| 特级毛片在线大全免费播放| 亚洲 无码 在线 专区| 污视频网站免费在线观看| 亚洲精品国产福利一二区| 一级特级aaaa毛片免费观看| 久久久久亚洲AV无码专区网站| CAOPORM国产精品视频免费| 亚洲一区日韩高清中文字幕亚洲| 一级做性色a爰片久久毛片免费| 亚洲国产精品无码久久青草 | 成人免费看黄20分钟| 亚洲午夜精品国产电影在线观看| 成人黄色免费网站| 亚洲欧洲免费无码| 亚洲国产午夜中文字幕精品黄网站| caoporn成人免费公开| 久久久亚洲精品国产| 91精品免费在线观看| 亚洲国产精品无码久久98| 亚洲XX00视频| a毛片在线还看免费网站| 久久久久亚洲Av无码专| 手机在线免费视频| 五级黄18以上免费看| 人人狠狠综合久久亚洲88| 成人免费的性色视频| 无人视频免费观看免费视频| 亚洲精品无码乱码成人 | 毛片免费全部播放一级| 免费手机在线看片| 亚洲伦另类中文字幕| 午夜免费福利网站| a级精品九九九大片免费看| 亚洲一级毛片免费观看| 亚洲精品在线视频| 久久福利资源网站免费看|