On 2 February 2017, the Daily Telegraph published a signed article by Ambassador Liu Xiaoming entitled “Steady Chinese growth is lifting millions out of poverty”. The full text is as follows:
Steady Chinese Growth Is Lifting Millions out of Poverty
In his New Year message, Chinese President Xi Jinping announced that China lifted another 10 million people out of poverty in 2016. Impressed by this number, some of my British friends came to me for the answer to why China was able to make such a remarkable achievement. I think the answer lies in not only strong and targeted policy measures to relief poverty but also sustained and steady economic growth to deliver greater benefit to more people. A bigger “pie” means that each and everyone’s share will be bigger.
Now, more and more economists have come to the point that, in the coming years, growth in China will not be a U or V-shaped rebound or experience a further dip. It is going to be L-shaped. This L-shaped curve means China’s economic growth, though slower than before, will sustain a steady speed.
This curve also means long-term steady growth. Indeed, 6pc to 7pc growth is slower than the double-digit rate a decade ago. However, this slower growth is resulting from the economic transition and upgrading that China has taken initiative to press ahead with and which are necessitated by future long-term growth. It shows that the Chinese economy is coming out of difficulties and entering a phase of “new normal” – with growth speed slightly downed for better quality.
Now, growth in China is powered by diverse sources and the economic structure has much improved. Domestic demand has replaced export as the major driver of growth. Innovation is bringing gradual changes to the old resource-intensive and investment-led growth model. As China commits itself to green and low-carbon development, slower yet steady growth helps, to a certain extent, relieve the pressure on resources and environment. So the current growth rate is more reasonable, more sustainable and more conducive to China’s long-term development.
To adapt to the L-shaped growth, China is making extra efforts to advance the supply side reform. This reform aims to solve an acute structural problem in China’s economy – the mismatch between supply and demand. Massive stimulation will be avoided so as to stop unwanted supply and cut excess capacity. Effective supply will be created to meet the fast upgrading consumer needs of the changing demography in China. The result will be a new and upgraded supply-demand balance and economic growth with better quality and higher efficiency.
At present, the challenges and potential risks in the Chinese economy, such as the debt level, the value of RMB, capital flight, etc., are attracting attention around the world. China is fully aware of them and has sufficient policy instruments in its tool kit to tackle these “growing pains”.
In terms of debt risks, total debt in China is only at the average level of the major economies. The share of foreign debt is too small to trigger systemic default. In addition, unlike some countries, China has put the money mostly in investment and construction rather than welfare or consumption. Such debt, backed by assets, will be paid. That is why China is able to lower the leverage ratio of businesses through market-based measures such as debt-to-equity swap.
With regard to the fluctuation of the RMB exchange rate, one only has to look at the positive fundamentals of the Chinese economy to know that there is no basis for RMB depreciation in the long run. China is not intended to devalue its currency to boost export. In fact, the RMB is showing strength and stability, compared with other global currencies, despite its slight depreciation against the US dollar. China will continue to work towards a market-based exchange rate regime. There is sufficient basis for the RMB to remain stable at a reasonable and balanced level.
As for capital outflow, it is only normal that capital should move in and out of China since China is working hard to build an open economy and a level playing field for businesses. China’s foreign reserve, despite of recent decline, remains the largest in the world, which would run a surplus after covering all China’s foreign debt and six months of imports.
As a response to the short-term capital outflow, China has strengthened the regulation and management of the foreign exchange market against “abnormal” operation.
Being the world’s second largest economy, China has contributed more than 25pc of world growth in recent years. In the age of globalization, we have a saying in Chinese that all countries are closely linked and “shall rise and fall together”. Just as the British often say, “we are all together”. Steady growth in China will continue to boost global growth. I am full of confidence for 2017, just as I am for China to continue to grow at a mid-to-high speed and make new contribution to the world economy.