China has the ability to avoid the economic crisis
Economists call for serious measures to overcome the challenges of the slowdown
China is resilient and can react to economic risks, negative factors and crises, experts say.
“My view is that a systemic crisis is still unlikely to occur in China,” said Thomas Orlik, chief economist at Bloomberg Economics.
Orlik spoke at the event “Will the Bubble Still Not Burst? A Discussion on China’s Economic Future” hosted by the Center for Strategic and International Studies on Thursday.
He published the book China: The Bubble That Never Pops in 2020, suggesting that China’s economy and financial system are “more resilient than Western critics attribute to them”, and that Chinese economic and financial policymakers are “more innovative, more resourceful at solving problems better than critics here in Washington, DC, or on Wall Street give them credit for.”
These are still the reasons why “there is nothing so far resembling a systemic financial crisis” in China, he said.
Orlik also said China’s economy has been hit by the pandemic, like that of the rest of the world, and “China’s resilience is holding up against the COVID-19 stress test.”
“The bubble that never bursts is still not going to burst,” Orlik said.
“In a global pandemic, we really can’t speak of winners, but China has lost less than most other major economies.”
Specifically, Orlik said that when it comes to public health, China is doing “extremely well.” In terms of growth, China has seen a V-shaped recovery after controlling the first outbreak of COVID-19 in 2020. But the picture has turned less positive after the Omicron outbreak and shutdowns in several major cities, leading to weak growth in the second quarter of this year.
In the long term, Orlik said, the United States and China would be closer to each other in terms of share of the global economy, although no one can say exactly when.
Data released by China’s National Bureau of Statistics on July 15 shows that China’s GDP grew 0.4 percent year-on-year in the second quarter of this year. China’s economy grew 4.8% in the first quarter and fell significantly in the second quarter, leading to GDP growth of 2.5% in the first half of the year. China’s full-year economic growth target is 5.5%.
It’s a “difficult time” for China and the United States with long-term economic uncertainty, Orlik said. For China, he suggested tackling problems in the real estate sector to avoid triggering bigger problems. For the United States, he warned that high inflation and aggressive Federal Reserve tightening could push the United States into a recession.
Joyce Chang, president of global research at JP Morgan, said China is able to ease policies and use stimulus to avoid a systematic crisis and still has “a lot of tools” to bounce back.
“Quarter-over-quarter growth was down 8.7%. But for the third quarter, we’re looking for a rebound. It’s likely to be above 10% quarter-over-quarter after an 8 .7%. We have 5.7% for the fourth quarter and the growth forecast for the year at 3.2%,” Chang said of China’s growth data and forecast.
Arthur Kroeber, head of research at Gavekal Dragonomics, said China is unlikely to experience a crisis, but that doesn’t mean it is “immune to crises”.
“The system is very resilient, and the ability to respond to the crisis is far greater than most people would give credit for,” Kroeber said. He also suggested that China should focus more on microeconomic forms of competition and tax law rather than paying too much attention to capital deployment.
Yao Yang, dean and professor at Peking University’s National School of Development, said Chinese economists’ views on China’s growth prospects vary.
“Long term, I’m actually more optimistic than most people. I think by the end of this decade, the Chinese economy will become as strong as the US economy,” Yao said.
China leads in many areas of technology and production, such as the production of electric vehicles which is “phenomenal”, he said.
Nicholas Lardy, a nonresident senior fellow at the Peterson Institute for International Economics, said China’s role in foreign investment, international trade and the global economy was increasing even during the pandemic.
“I would point out that China has actually continued to converge strongly towards advanced economy levels in 2020, 2021 and again this year,” Lardy said.