On July 29th, the X8026 freight train loaded with 100 TEUs for export departed from Hefei North Railway Station and headed for Budapest, Hungary. Photo by Song Yanjun (People’s Vision)
In Hengda Fuji Elevator Co., Ltd. in Lianshi Town, Nanxun District, Huzhou City, Zhejiang Province, workers are completing a wholesale elevator order to overseas markets. Photo by Zhang Bin (People’s Vision)
In Puyuan Jingdian Technology Co., Ltd., located in suzhou science and technology town, Jiangsu Province, employees are testing the quality of digital oscilloscopes to be exported soon. Photo by Hua Xuegen (People’s Vision)
A few days ago, at the Qianwan Wharf of Qingdao Port, cargo ships were loading and unloading containers. Photo by Li Ziheng (Xinhua News Agency)
Li Xuesong (Director, Institute of Quantitative and Technical Economics, China Academy of Social Sciences)
Xiao Lisheng (Director, Global Macroeconomics Research Office, Institute of World Economics and Politics, Chinese Academy of Social Sciences)
Chen Yuyu (Professor, Department of Applied Economics, Guanghua School of Management, Peking University, Director, Institute of Economic Policy, Peking University)
Nalongsa Putapong Monkun (Chairman of Chinese General Chamber of Commerce in Thailand)
Park Shengzan (Director, China Institute of Management)
Sebastian Perimony (French Schiller Institute researcher, expert on international issues)
Frederick Baldan (CEO, Ceibs China Europe Business Consulting Company)
China efficiently coordinated the prevention and control of epidemic situation and economic and social development, effectively responded to the impact of epidemic situation, Ukrainian crisis and other factors, overcame the downward pressure on the economy, and quickly stabilized and rebounded. China’s economy has shown great resilience and vitality, adding confidence and strength to the recovery of the world economy.
Since the beginning of this year, the international environment has become more complicated and severe, and the domestic epidemic situation in China has been distributed frequently, which has obviously increased the adverse effects. How to evaluate the economic performance of China in the first half of this year?
Chen Yuyu: The economic growth in the first quarter of 2022 was relatively optimistic, reaching 4.8%. Since April, due to the short-term negative impact, the main economic indicators have obviously declined for nearly two months, and finally stabilized and rebounded in June. In the face of an unusually complicated and difficult situation, the economy grew by 0.4% in the second quarter and by 2.5% in the first half of the year. China’s economy has withstood the severe test, especially in the second quarter, which shows that the internal vitality and resilience of the economy are very strong, and the fundamentals of China’s long-term economic improvement have not changed. In the medium and long term, we have reason to be full of confidence in China’s economy.
Nalongsa Putapengmongkun: In the first half of this year, the overall economic development of China was steady and rising. In the second quarter, under the impact of COVID-19 epidemic rebound, Ukrainian crisis and other factors, China’s economic operation fluctuated greatly. With the efficient coordination of epidemic prevention and control and economic and social development in China, a series of economic measures have been introduced and implemented. The epidemic prevention and control in key areas has achieved positive results, and the effect of a package of policies and measures to stabilize the economy has been gradually released. In June, economic growth rebounded significantly.
Faced with the impact of unexpected factors, China coordinated epidemic prevention and control and economic and social development, protected people’s life safety and health, made great efforts to ensure the stability and safety of the supply chain industry chain, and the economy stabilized and rebounded in a relatively short period of time, indicating that the good momentum of sustained and healthy economic development in China has not changed. As the second largest economy in the world, China has accumulated a solid material foundation for a long time and the advantages of super-large market scale. In addition, it is constantly promoting the construction of a new development pattern, so it can withstand the downward pressure of the economy and continue to play the role of "stabilizer" for the global economy.
Sebastian Perimony: At present, influenced by the Ukrainian crisis and other factors, the world economic recovery is under great pressure, and some countries are at risk of falling into recession in the future. The state of "high inflation" and "low growth" in some countries has a negative impact on the real economy, employment and consumption of all countries in the world.
Against this background, China’s economy grew by 2.5% in the first half of the year, and many data indicators showed that China’s economy maintained a good trend and showed strong resilience. In particular, from January to June this year, the added value of industrial enterprises above designated size in China increased by 3.4% year-on-year, and the investment in infrastructure construction increased by 7.1% year-on-year, indicating that the real economy in China has recovered steadily. In addition, in the first half of this year, China’s high-quality economic development progressed steadily, and the high-tech manufacturing industry maintained rapid development, which was impressive.
Park Shengzan: Since the beginning of this year, the international situation has been complicated and severe, and the world economic growth has slowed down obviously. It is not easy for China to promote economic and social development to recover as soon as possible, and it is difficult for China to achieve positive economic growth in the second quarter. After a severe situation from March to April, the economy picked up quickly from May to June, which played a key role in driving economic growth in the second quarter. Good export is a bright spot of China’s economy. In the first half of this year, the total import and export value of China’s goods trade was 19.8 trillion yuan, up 9.4% year-on-year. The import and export of foreign trade achieved steady growth and became an important driving force for economic development.
How to evaluate the macroeconomic policies adopted by China in response to the downward pressure on the economy and their effects?
Xiao Lisheng: Overall, China’s economy is still in transition. Although the economic growth rate of 2.5% in the first half of the year was lower than the normal level, there are still bright spots. The basic policies of stabilizing growth, restructuring and promoting reform have not changed. Under the severe international situation and epidemic situation, China continued to adhere to industrial upgrading and structural transformation, and insisted on "housing and not speculation", and made efforts to stabilize growth, stabilize market players, ensure employment, adjust structure and promote reform in an orderly manner. For example, China’s manufacturing investment increased by 10.4% in the first half of the year. China promotes the transformation to high-end manufacturing industry, does not follow the old road of resource-intensive development, stimulates the vitality of scientific and technological innovation, and injects more kinetic energy into economic development, which is also one of the reasons for the continuous growth of export share in the first half of the year.
Chen Yuyu: China’s macroeconomic policies have shown the ability to cope with huge economic fluctuations, with quick response and strong strength. Relevant departments have discovered problems early and issued comprehensive policies. In late May, 2022, the State Council launched a package of policies and measures to firmly stabilize the economy, and put forward 33 measures in six aspects: fiscal policy, monetary and financial policy, stable investment and consumption promotion policy, food and energy security policy, industrial chain supply chain stability policy and basic livelihood policy. The package of policies and measures to stabilize the economy has played a rapid role in more than two months. Although the economy only grew by 0.4% in the second quarter, it has already grown. The decline narrowed in May, and many indicators have turned from negative to positive in June, and the overall economic situation has stabilized and rebounded. The rapid functioning of relevant policies is also inseparable from China’s basic work in deleveraging, cleaning up shadow banking, focusing on solving hidden risks in key areas and preventing systemic risks in the past few years.
In recent years, China’s macroeconomic policy system has been continuously improved in the process of coping with risk challenges. With the support of the government’s strong macro-policy, monetary policy and fiscal policy, the market’s confidence in economic growth has been further enhanced. For example, the People’s Bank of China handed over more than one trillion yuan of surplus profits to the central government, which greatly enhanced the central government’s ability to bail out this year and cope with the huge negative impact of the economy.
Sebastian Perimony: China has effectively coordinated epidemic prevention and control and economic and social development, and introduced comprehensive policies to stabilize economic growth, such as reducing taxes and fees, and increasing infrastructure investment, which has stabilized the basic economic disk. I have noticed that China’s investment in scientific research has greatly increased. At present, the scale of digital economy ranks second in the world, and the added value of high-tech manufacturing industry increased by 9.6% in the first half of the year. These advances in science and technology not only promote the development of related industries, but also help to create jobs and promote growth, which will strongly promote the high-quality economic development of China.
At present, China’s economy has stabilized and improved, but the triple pressures of demand contraction, supply shock and expected weakening have not changed, and some unfavorable factors are still evolving, and many market players still face great difficulties. What difficulties does China’s economic operation face in the second half of the year, and how to deal with them?
Li Xuesong: In the second half of the year, China’s economy may also face the challenge of multiple risks: First, local epidemics are repeated, which restricts economic operation; Second, the contraction of external demand in developed countries has led to the downward pressure on China’s exports; Third, the weak supply and demand of real estate continues to drag down the growth of domestic demand. According to the requirements of the CPC Central Committee that "the epidemic should be prevented, the economy should be stabilized and the development should be safe", if these three risks can be effectively resolved, China’s economy will return to the normal growth range in the second half of the year. Policy responses can be strengthened from the following aspects.
Plan the incremental reserve policy in time to provide assistance for economic recovery. We will increase efforts to stabilize growth and ensure employment in fiscal policy. In terms of monetary policy, we should pay attention to coordinating aggregate instruments and structural instruments, reduce the financing cost of the real economy, and maintain a reasonable growth of total credit. We should also increase support for areas and industries that are greatly affected by the epidemic, as well as key areas such as scientific and technological innovation and green and low-carbon transformation.
Accelerate reform and stabilize market expectations and expand effective domestic demand. Efforts should be made to stabilize the expectations of various market players, especially to avoid the downward convergence expectations of various market players for future economic development.
Adhere to both chain maintenance and epidemic prevention and control, promote the continuous smooth supply chain of the industrial chain, and timely prevent the cost impact of the upstream on the middle and lower reaches. Give full play to the role of market mechanism, improve the ability of regulating the supply and demand of bulk commodities, increase the efforts to ensure the supply and price stability of important raw materials such as rare and precious metals, chemical products and chips, break hidden barriers and unreasonable restrictions, and actively explore the dynamic balance path between epidemic prevention and control and industrial development. Grasp the opportunity period of digital and green development, strengthen technological innovation and enhance the resilience of industrial chain supply chain.
Highlight the orientation of employment priority to fiscal and monetary policies, accelerate the release of effective demand, and boost the labor market. We will promote both supply and demand, speed up the disposal and resolution of risks of housing enterprises, and take various measures to promote the stable and healthy development of the real estate market.
Frederick Baldan: Against the background of global epidemic, challenges and twists and turns of globalization, China has made full assessment and preparation. China’s continued opening to the outside world and the formal entry into force of the regional comprehensive economic partnership agreement this year can all help China hedge some global supply chain tensions. China firmly promotes the construction of a new development pattern and makes full use of the vast domestic and international markets. China has strong economic resilience, large room for manoeuvre and great growth potential, which can meet the short-term challenges of similar epidemics and accumulate strength for long-term development.
The long-term positive momentum of China’s economy is even more obvious. The quality of China’s labor force is getting higher and higher, which enhances the international competitiveness of China’s economy and is conducive to the stability and long-term development of China’s economy.
At present, inflation is high in many countries around the world, the risk of stagflation is rising, the policies of major economies tend to tighten, and external instability and uncertainties have increased significantly. How to evaluate the overall situation of the current world economy? What impact does the relevant situation have on China’s economy?
Li Xuesong: Since 2022, the global economic environment has become more complex, with more challenges and more uncertainties. Geopolitical conflicts have intensified, and some countries are facing stagflation risks due to high inflation. In the second half of 2022, some developed economies may slide from inflation to stagflation, emerging markets and developing economies show regional differentiation, global interest rate hikes, and monetary tightening may trigger economic recession and sovereign debt crisis in some countries.
At present, the cycles of the world’s major economies are out of sync, and the policy objectives and directions are quite different. Despite the downward trend, the American economy is still in an overheated state, with strong aggregate demand, high inflationary pressure and a historically low unemployment rate. The economic cycle of the euro zone lags behind that of the United States, and the recovery is not as stable as that of the United States. However, due to the Ukrainian crisis, the gap between total supply and total demand has widened rapidly, and inflationary pressure has risen sharply. It is expected that in the second half of the year, with the tightening of monetary policy in the United States and Europe and the gradual downward cycle of the US economy, the risk of shocks in the international financial market may be further aggravated.
The main goal of China’s macro-policy is to stabilize growth and ensure employment. Facing the tightening of external constraints, independent implementation of macro-policy requires stronger determination and more superb skills. The spillover effects of external economic situation and policy changes on China are more complicated and changeable, and it is more difficult to coordinate international policies.
Park Shengzan: The Ukrainian crisis and the economic downturn in the United States are prominent factors affecting global economic growth. Russia and Ukraine are both important countries that affect energy and food prices. The Ukrainian crisis will lead to the instability of supply and demand, and the price increase will show a long-term trend, and the US economy may also be directly or indirectly affected. The economic downturn in the United States will lead to a decline in global stock prices, which in turn will lead to a decline in the value of enterprises, losses for investors, and increasing anxiety about the future, which in turn will lead to an increase in savings and a decrease in consumption.
Under the background of increasing inflation in the United States and the continuing crisis in Ukraine, many countries in the world are likely to face stagflation due to rising prices and interest rates, which will trigger a "domino effect" and the global economic situation may deteriorate further.
Under such circumstances, China needs to further stimulate economic growth through investment and consumption, and strive to strengthen its economic resilience. In order to prevent consumption from shrinking in China, the government needs to give policy support. The reason why China can cope with inflation well is that the price stabilization policy under the government’s control continues to play an effective role.
Frederick Baldan: Global economic growth is still facing many challenges such as epidemic and geopolitical conflicts. The International Monetary Fund recently lowered its forecast of world economic growth to 3.2% and 2.9% in 2022 and 2023, respectively, reflecting the pressure of world economic recovery and growth. The developed economies in Europe and America are experiencing high inflation and weak growth. The debt pressure of some developing countries is unrelenting, and the food crisis is imminent. All parties need to work together to meet the challenge.
As far as the region is concerned, the Asia-Pacific region should give full play to its advantages of rapid development, maintain long-term stability and security in the Asia-Pacific region, and prevent the Cold War mentality from eroding the environment for economic growth in the Asia-Pacific region. As far as China is concerned, economic growth will still face the pressure of repeated epidemics in the future. How to gradually restore personnel exchanges under the background of epidemic situation is also a major issue. From the perspective of enterprise and business cooperation, personnel exchanges are indispensable for business development and market expansion. Closer personnel exchanges can promote business cooperation and cultural exchanges between China and the outside world, and promote mutual understanding.
At present, the United States and some countries in Europe are facing the dilemma of high inflation. Is there a risk of imported inflation for China’s economy? What preparations should be made?
Xiao Lisheng: At present, the overall inflation situation in China is relatively stable, with the consumer price index (CPI) maintained at 1.7% in the first half of the year. On the one hand, the overall demand of China’s economy was relatively weak in the first half of the year, and there was no significant price increase. On the other hand, the state has made arrangements in advance in the supply of commodities such as energy and food.
Due to the effective regulation and control of bulk commodities by the China government, the risk transmission from overseas has been prevented, especially the global energy and food price increase has been transmitted to China. In the case of high overseas inflation, China’s inflation has remained basically stable, which has reserved a large space for monetary policy, fiscal policy and future aggregate demand management policy, and is conducive to promoting China’s economy to return to a reasonable range.
Chen Yuyu: The international inflation situation may last for a long time, because loose monetary and fiscal policies in some economies have created strong aggregate demand.
In response to the impact of the epidemic on the economy, China’s macro leverage ratio has increased slightly, and it still has a large policy space. In terms of financial policy, China has always adhered to a prudent monetary policy in recent years, and will not overuse monetary policy tools because of short-term economic fluctuations.
Nalongsa Putapengmongkun: China’s economy is running steadily, prices are relatively stable, the macro-policy environment is suitable, and there are basically no conditions for high inflation. China’s economy has maintained a steady growth momentum for a long time, the employment situation is basically stable, foreign trade is growing rapidly, high-quality development has achieved new results, and it has the ability to cope with economic risks.
With the improvement of epidemic prevention and control situation and the emergence of policy effects, China’s advantages such as large economic volume, wide market space, sufficient development resilience, many reform dividends and strong governance capacity will be further exerted, and China’s economy is expected to maintain the trend of recovery and development.
Recently, the International Monetary Fund, the World Economic Forum and other international organizations have warned that the global economy is facing the risk of recession, and China’s economy will still face many risk challenges in the future. In the long run, what should China’s economy do to win the initiative?
Li Xuesong: We should guard against the spillover effect of external risks to China and stabilize the international community’s confidence in China’s economy. First, strengthen the determination to independently implement macro policies. According to the needs of China’s current economic cycle, we should put steady growth and employment protection at the top of China’s multiple objectives of macro-policies, and implement macro-policies more actively and meaningfully. In the current weak demand for credit in the private sector, we should pay more attention to the role of proactive fiscal policy. Second, enhance the flexibility of two-way fluctuation of RMB exchange rate and give full play to the role of exchange rate as a buffer against external risks. An appropriate range of phased exchange rate depreciation will help to release risks and stabilize expectations. Third, we should stabilize the confidence of the international community in China’s economy and capital market. Maintain a reasonable economic growth rate and guide the international community’s expectation that China’s economy will improve for a long time and its weight will increase in the global structure. While strengthening independent innovation, we need to continue to deeply integrate into the global industrial chain and give play to the attraction of China’s super-large-scale market advantage to foreign enterprises.
Park Sheng-zan: In the second half of the year, repeated epidemics, shrinking consumption and rising prices of energy and food may become constraints on China’s economic growth. China needs to formulate and implement systematic and scientific epidemic response strategies, increase domestic demand, enhance the investment vitality of private enterprises, boost the confidence of foreign capital in China market, and constantly improve relevant systems to create a good investment environment for foreign enterprises.
Against the background of repeated delays in the epidemic and weak global economic recovery, China’s economy will continue to grow, and the quality of economic growth will be further improved. China not only pursues the speed of economic growth, but also pays more attention to improving quality and efficiency. Making innovation the driving force of economic growth will be conducive to the optimization of economic structure and the enhancement of the long-term positive trend.
Sebastian Perimony: In the second half of the year, the risk of inflation in the world economy will not subside, and the epidemic is still likely to recur, and the impact has not been eliminated. The uncertainty caused by the Ukrainian crisis still exists, which will affect the sustained recovery of China’s economy and the realization of the overall economic growth target. As the second largest economy in the world, China emphasizes the development concept of common development and common prosperity, upholds the concept of building a community of human destiny, and constantly implements the initiative of jointly building the Belt and Road Initiative. China’s economic recovery has a positive impact on the global economy. China also put forward a global development initiative, focusing on the fundamental issue of "development", which responded to the expectations and needs of the current world, especially developing countries, and received wide support and response. It is expected that relevant policies will continue to be implemented and contribute to promoting global common development and economic recovery.
(Interviewed by our reporters Li Xinyi, Sun Guangyong, Ma Fei, Zhang Penghui and Liu Lingling)
