Research Series on the Chinese Dream and China’s Development Path
Yang Li Ping Li Xuesong Li Ping Zhang Editors
Economic Analysis and Forecast of China (2015) www.ebook3000.com
Research Series on the Chinese Dream and China’s Development Path Project Director Xie Shouguang, President, Social Sciences Academic Press Series editors Li Yang, Vice president, Chinese Academy of Social Sciences, Beijing, China
Li Peilin, Vice president, Chinese Academy of Social Sciences, Beijing, China Academic Advisors Cai Fang, Gao Peiyong, Li Lin, Li Qiang, Ma Huaide, Pan Jiahua, Pei Changhong, Qi Ye, Wang Lei, Wang Ming, Zhang Yuyan, Zheng Yongnian, Zhou Hong
Drawing on a large body of empirical studies done over the last two decades, the Research Series on the Chinese Dream and China’s Development Path seeks to provide its readers with in-depth analyses of the past and present, and forecasts for the future course of China’s development. Thanks to the adoption of Socialism with Chinese characteristics, and the implementation of comprehensive reform and opening, China has made tremendous achievements in areas such as political reform, economic development, and social construction, and is making great strides towards the realization of the Chinese dream of national rejuvenation. In addition to presenting a detailed account of many of these achievements, the authors also discuss what lessons other countries can learn from China’s experience. This series will be an invaluable companion to every researcher who is trying to gain a deeper understanding of the development model, path and experience unique to China.
More information about this series at http://www.springer.com/series/13571
Yang Li Ping Li Xuesong Li Ping Zhang •
Economic Analysis and Forecast of China (2015)
Editors Yang Li
Chinese Academy of Social Sciences Dongcheng District, Beijing China
Xuesong Li Chinese Academy of Social Sciences Dongcheng District, Beijing China
Ping Li Chinese Academy of Social Sciences Dongcheng District, Beijing China
Ping Zhang Chinese Academy of Social Sciences Dongcheng District, Beijing China
Translated by Jiang Mengying, and published with financial support of the Innovation Program of the Chinese Academy of Social Sciences.
Since China’s reform and opening began in 1978, the country has come a long way on the path of Socialism with Chinese Characteristics, under the leadership of the Communist Party of China. Over thirty years of reform, efforts and sustained spectacular economic growth have turned China into the world’s second largest economy, and brought many profound changes in the Chinese society. These historically signiﬁcant developments have been garnering increasing attention from scholars, governments, and the general public alike around the world since the 1990s, when the newest wave of China studies began to gather steam. Some of the hottest topics have included the so-called “China miracle”, “Chinese phenomenon”, “Chinese experience”, “Chinese path”, and the “Chinese model”. Homegrown researchers have soon followed suit. Already hugely productive, this vibrant ﬁeld is putting out a large number of books each year, with Social Sciences Academic Press alone having published hundreds of titles on a wide range of subjects. Because most of these books have been written and published in Chinese, readership has been limited outside China—even among many who study China— for whom English is still the lingua franca. This language barrier has been an impediment to efforts by academia, business communities, and policy-makers in other countries to form a thorough understanding of contemporary China, of what is distinct about China’s past and present may mean not only for her future but also for the future of the world. The need to remove such an impediment is both real and urgent, and the Research Series on the Chinese Dream and China’s Development Path is my answer to the call. This series features some of the most notable achievements from the last 20 years by scholars in China in a variety of research topics related to reform and opening. They include both theoretical explorations and empirical studies, and cover economy, society, politics, law, culture, and ecology, the six areas in which reform and opening policies have had the deepest impact and farthest-reaching consequences for the country. Authors for the series have also tried to articulate their visions of the “Chinese Dream” and how the country can realize it in these ﬁelds and beyond.
All of the editors and authors for the Research Series on the Chinese Dream and China’s Development Path are both longtime students of reform and opening and recognized authorities in their respective academic ﬁelds. Their credentials and expertise lend credibility to these books, each of which having been subject to a rigorous peer-review process for inclusion in the series. As part of the Reform and Development Program under the State Administration of Press, Publication, Radio, Film and Television of the People’s Republic of China, the series is published by Springer, a Germany-based academic publisher of international repute, and distributed overseas. I am conﬁdent that it will help ﬁll a lacuna in studies of China in the era of reform and opening. Xie Shouguang
New Normal, New Leap I During recent years, in discussing foreign and domestic economic development patterns since the global ﬁnancial crisis, more and more people are inclined to describe it as the “new normal.” The meaning is similar to such phrases as “new stage,” “new era,” “new order,” and “medium- and high-speed development stage” for economic development. The term was ﬁrst used by President Xi Jinping at the beginning of 2014 and later referred to in many formal occasions. “New normal” is becoming a standard concept to summarize the current and near-future domestic economic situation in China. The “new normal” is a strategic concept of historical signiﬁcance. The word “new” divides global development since the middle and late 1980s into two periods with systematic differences. Externally speaking, these two periods are characterized by different economic growth rates which resulted in different macro-economic variables, such as employment, price of commodities, interest rate, exchange rate, balance of payments, ﬁnancial revenue, expenditure, money supply, and demand. Internally speaking, the solid foundation supporting the long-term economic development is also different, such as scientiﬁc and technical innovation, its industrialization level, population structure, factor supply efﬁciency, relationship between saving and investment, and the real interest rate level when saving and investment are at equilibrium. Therefore, new normal reveals that in analyzing the present and planning for the future, we should ﬁrst and foremost spend time reviewing the past to make detailed analysis of the “old normal”, in order to gain a clear perception about where we have started several decades ago, why we have come to where we are, and how to avoid following the old track.
The judgment of “normal” indicates the main themes of domestic and foreign economic development at present and in the future. It reminds us that no matter how much we would like to linger on the “old normal,” there is no turning back if we take the large probability into consideration. Therefore, to face the future, we must make a comprehensive adjustment of our ideal, attitude, strategy, and policy to rapidly adapt ourselves to the new normal and learn to grasp the principle of production and living under the new normal.
II Before the new normal, the world has undergone an old normal stage called “great stability” by the international economic circle (an unforgettable prosperous period seldom seen in history). During the two decades from the mid-1980s to the global ﬁnancial crisis in the twenty-ﬁrst century, several ﬁnancial crises of different intensities erupted (1980s in Latin America, 1997 in Asia, 1998 in Russia, and 2001 in America), and the decline of the real estate market at the end of 1990s and the IT bubble burst at the beginning of the twenty-ﬁrst century occurred in America. However, overall, that period has witnessed a “happy time” rarely seen in the development of the global economy. The global economic development of the stable period is basically characterized by sustainable rapid economic growth, low inflation rate and low employment rate as well as infrequent economic fluctuation. “Great stability” is an integrated outcome from global scientiﬁc and technological progress, institutional reform and ongoing globalization. The year 2007 was the turning point that the “great stability” was transformed into a great crisis. The process from the phases of the “great stability” to the great crisis and to the new normal was mainly characterized by long-term structural adjustments. This was actually a process in which various conflicts were produced, accumulated, escalated, expanded, and broke out under the veneer of the prosperity of “great stability.” We think, two factors are critical in such a highly complicated historical transformation resulting from various factors: ﬁrstly, was the aggravation of the distorted economic development pattern and structure commonly seen in the world today. However, immersed in the comfort brought about by the great stability, most developed countries, in particular, showed a benign neglect to the crisis and were unwilling to make adjustments; secondly, the unreasonable international economic order formed after the global labor reorganization has led to increasingly severe global economic imbalance. Following the ending of the old normal which was mainly characterized by great stability is now the “new normal” for the global economy to make in-depth adjustments and reorganization. There is no exception both for China and the rest of the world.
III The global ﬁnancial and economic crisis triggered by America’s subprime crisis in 2007 has terminated the 20-year-long “great stability” period. If we regard the crisis as “off the normal economic operation track,” then there are two ways to recover from the crisis: one is to get back on track and the other, blaze a new trail. The former is the outlet for many crises; it is the unending alteration from off the track to back on the track that gives rise to the economic operation cycle. Blazing a new trail is otherwise. It leads the economic operation off the old track, to break the cycle and explore a new direction, from which the historical course for human development is heading toward a qualitative transformation. The fact that the seven-year-long crisis, (after all the hard struggling and in-depth adjustments), remains largely unchanged, tells us that like the crises in 1930s and 1970s, this crisis again heralds a profound change in the global economic development track. To cope with this change, a dependence on the “standard” (even “hyper-normal”) stimulus policy will not work, nor will our efforts to remedy the systems or institutions jeopardized from the crisis. This means, we must explore again the tangible economic foundation for global growth and restructure its corresponding global governance mechanism. Obviously, the historical mission we are facing now is obviously different from the recession and recovery stage in the general crisis cycle. We deﬁne the recovery process that starts from such a crisis and is mainly characterized by the exploration of a new path for global economic development as the new normal of the global economy. The new normal global economy has ﬁve characteristics: ﬁrst, the global economic growth fluctuates at a low level; second, each country is stuck in the dilemma between “deleverage” and “balance sheet remediation”; third, trade protectionism is escalating; fourth, the country’s policy cycle is nonsynchronous; and ﬁfth, a vacuum appears in global governance. Factors resulting in the global new normal come from the long-term stagnation of real economy which is mainly caused by sluggish technological advance, exacerbation of population structure, decline of real interest rates to a negative value, and the fading effects of the balance sheet. This means, even if we eliminate the direct factors causing the crisis, developed economies still face many structural challenges in their future growth. Therefore, it is likely for them to lapse into the new normal characterized by long-term stagnation. Theoretically and practically speaking, in coping with long-term stagnation, we shall not depend on the rarely effective demand management policy represented by currency regulation and control. Instead, we should resort to the ﬁscal policy directly influencing total spending levels and its structure. Facing such a situation, economists unanimously agree that the only way to walk out of the long-term stagnation is to advance all-around reform intrepidly. The priority of the reform should be given to the supply end. We should encourage innovation and entrepreneurship, promote educational development, increase human capital, enhance the flexibility of labor markets, and decrease taxes for enterprises and residents.
IV Since 2009, China’s economy has entered the new normal stage, which is mainly characterized by structural slowdown. This followed the declining trend of the economic growth rate, a comprehensive manifestation of the national economy. The new changes come in a series of corresponding macro-economic indexes, such as saving, investment, commodity price, employment, ﬁnancial revenue and expenditure (including deﬁcit), international balance of payments, RMB exchange rate, money supply, interest rate. Factors leading to the structural slowdown were produced at the substantial level deciding economic development, which mainly included a decline in resource allocation efﬁciency and factor supply efﬁciency, stagnation in innovation, and an enhancement of the restriction in resources and environment. The new normal brings new challenges. It not only exposes deep-seated problems covered-up for the long term in the national economy, but also incurs a series of new problems. In summary, these problems are mainly manifested in ﬁve aspects: ﬁrst, economic development lapsed into a vicious cycle “investmentgrowth-surplus.” Our growth is highly dependent on investment while investment is the primary reason for excess production capacity. The key to stable economic growth under the new normal is to improve investment mechanisms through reform, dealing with the relationship between what to invest, how to invest, and who to invest in. The second principle is the soaring of leverage ratio. The soaring of leverage ratio is a ﬁnancial crisis of comprehensive and systematic signiﬁcance. The liquidity of China’s local debt falls short of the ability to pay. In coping with the debt problem, the short-term objective is to stop the debt situation from aggravating, and the long-term aim is to establish a rational and sustainable local government ﬁnancing mechanism. The third principle is the transformation of urbanization. To advance urbanization under the new normal, we must change our view that only urban residents can plan urbanization, reverse the “development zone” trend, avoid “losing the market,” improve land utilization efﬁciency, and emphasize the integration between important supply factors to long-term sustainable development. This would include such factors as industry clustering, accumulation of human capital and knowledge spillover and make city and countryside integration the ultimate goal. Fourth, the reversal of the real estate market needs to be a priority. It is not the policy that has triggered this real estate market decline but the profound change in the internal supply-demand pattern of the urban housing market. The short-term policy should focus on reforming the countless real estate regulations, discarding those improper and self-contradictory ones and purifying the market. The long-term policy should be targeted at speeding up the “top-level design” of the real estate market, especially solving problems in the “Home Ownership Scheme,” such as the rent–sell ratio, the relationship between housing and land and between real estate market and urbanization. In addition, the main developer of the real estate market, the government’s status, and role in the real estate market needs to be reanalyzed, as does the real estate ﬁnancial system. The
ﬁscal taxation policy which supports and regulates the development of real estate market needs better inspection. The ﬁfth principle to stable economic growth is to assess why ﬁnancial chaos keeps cropping up. It is indeed a chaotic phenomenon that the amount of money increases concurrently with the interest rate and price rise. To avert the ﬁnancial chaos, we must reform the system and institution, ﬁrst by reforming the current foreign exchange reserve management system, in order to protect our monetary policy from being kidnapped by foreign exchange reserves. Second, we must reform the model of separated supervision by multi-sectors to eliminate the root of regulatory arbitrage and to cover more of the emerging comprehensive ﬁnancial business. Lastly, it is imperative that we abandon the complicated and outdated “policy restriction” to purify the market.
V The new normal is pregnant with revolutionary transformation. Globally speaking, the new normal means the restructuring of the supply chain, the adjustment of the economic structure, the reshaping of the governance system, and the reshuffling of the relationship between great powers. Domestically speaking, the new normal means the “rebirth” of China’s economy. Through this stage, China’s economy will fundamentally shake off the investment-driven and export-driven growth mode and tread on a path characterized by the pursuit of quality, efﬁciency, and sustainable development. This will avoid the middle-income trap and realize the rejuvenation of China. The new normal has ushered in development opportunities for us and endowed the period of strategic opportunity with a new shade of meaning. The new normal helps to “squeeze out the moisture.” The moisture in our economy can be found mainly in the investment-driven economic growth mode. If investment cannot be channeled into productivity, the increase rate correspondent to this part of investment is moisture; if it is channeled into productivity, there appears to be an excess of production capacity and overstocking of product, the corresponding increase rate is also moisture. Undoubtedly, since the decline of the economic growth under the new normal is mainly attributed to the decrease of the investment growth, we will have favorable conditions to compress and squeeze out the moisture. The new normal is beneﬁcial to the implementation of the innovation-driven strategy. Since we can no longer depend on traditional factors such as investment and export, China’s economy is forced into the new innovation-driven track, a signiﬁcant transformation we have been seeking during all these years. The new normal is beneﬁcial to unravel the relationship between government and the market. It will make the GDP assessment mechanism decline in importance. As a result, the investment promotion and investment impulsion can be effectively curbed. With a potential solution for the government’s long-term “offside” and “absence” problem, we can better exert the government’s influence. The new
normal requires us to strengthen the main status of the enterprise and the decisive role of the market in resource allocation and to realize beneﬁt and efﬁciency maximization of resources based on market rules, market price, and market competition. The new normal is beneﬁcial to the development of a sustainable economy. Only under a lax macro-environment can we decrease resource waste and environmental pollution and truly promote the ecological construction of civilization. The new normal is beneﬁcial to the realization of social equality and justice. For a very long time in the past, an overemphasis on speed led to an excessive dependence on investment, which has made the capital owner a long-term dominant role in the economy. Consequently, the proﬁts took up too much a proportion in national income and correspondingly, the labor income took up less a proportion. If such an unequal distribution pattern continues, it will aggravate polarization, rigidifying social classes and beneﬁts pattern. To sum up, the new normal has brought us development opportunities and while keeping abreast of the times, endowed China’s period of strategic opportunity with a new shade of meaning under new conditions. We must proceed from the stage characteristic of economic development, concentrate on the stratagem, adjust our overall ideal, attitude, strategy and policy, adapt ourselves rapidly to the new normal, and improve the system and the structure of the rule of law of socialist market economy. Globally, we have entered a “reform competition period”, whoever has the most profound insight into the reform’s urgency, complexity, and diversity, and has the most complete strategy, the strongest determination and the most obvious effect will gain a better niche in the future global competition. The decision to intensify overall reform and to govern the country by laws passed in the 3rd and 4th Plenary Session of the 18th Central Committee of CPC is a well-considered guiding principle to guide Chinese people to implement a new round of reform and realize China’s Dream. Beijing, China
Academic Committee of “Economic Analysis and Forecast of China”
Chairman: Li Yang Vice-chairman: Liu Shucheng, Lv Zheng Members: Wang Guogang, Tian Xueyuan, Zhu Ling, Zhang Ping, Zhang Chewei, Zhang Zhuoyuan, Zhang Xiaoshan, Zhang Xiaojing, Li Ping, Li Zhou, Li Xuesong, Yang Shengming, Wang Tongsan, Zhou Shulian, Jin Bei, Yin Jianfeng, Gao peiyong, Huang Qunhui, Cai Fang, Pei Changhong, Pan Jiahua, Wei houkuai
Editorial Board of “Blue Book of China’s Economy” Chief Editor: Li Yang Vice-Chief Editors: Li Ping, Li Xuesong, Zhang Ping Contributors: Li Yang, Li Xuesong, Zhang Tao, Li Jun, Fan Mingtai, Lou Feng, Wang Wenbo, Peng Zhan, Liu Shucheng, Zhao Kun, Wang Baolin, Fu Linghui, Li Zhou, Dang Guoying, Yuan Lei, Jin Bei, Xie Sanming, Zhang Liqun, Li Poxi, Zheng Chaoyu, Chen Lei, Sui Zhanlin, Zhang Tongbin, Cai Jin, Wu Wei, Yan Xiandong, Ye Huan, Jin Bosong, Liu Jianyin, Chen Kexin, Cai Fang, Lu Yang, Fu Guangjun, Zhu Pingfang, Chen Shoudong, Liu Yang, Zhang Guanhua, Xiong Junli, Liu Mengjun, Peng Suling, Chen Xinhui, Chenli Ailun, Wu Chengye, Chen Yanwu Editorial Team Director: Li Jinhua Vice Director: Peng Zhan Members: Han Shengjun, Zhang Jie, Chen Xingxing, Wang Xifeng
Macro-economic Policy and Macro-economic Regulation and Control
Bottom of Downturn and Economic Transformation and Upgrading—Analysis and Prospect of Economic Situation from 2014 to 2015 . . . . . . . . . . . . . . . . . . . . . 127 Zhang Liqun
The Inﬂuence of the Adjustment of Childbearing Policy on the Potential Growth Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Cai Fang and Lu Yang 10 Analytical Prediction of China’s Status of Tax Revenue in 2014 the Preliminary Outlook of 2015. . . . . . . . . . . . . . . . . . . . . . 149 Fu Guangjun Part IV
Analysis of Consumption, Investment and International Trade
11 The Trend and Characteristic of Our Economic Development Under the “New Normal” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Cai Jin and Wu Wei 12 Operation of Monetary Finance Under the New Normal . . . . . . . . . 177 Yan Xiandong and Ye Huan 13 Analysis of China’s Foreign Trade Situation in 2014, and Its Prospects in 2015—Also a Discussion on the Priority in Foreign Development in the Transition Period . . . . . . . . . . . . . . . 195 Jin Baisong and Liu Jianying
About the Editors
Yang Li holds a BA in Economics, from Anhui University; MA in Economics, from Fudan University; Ph.D. in Economics, from Renmin University of China; Visiting scholar at Columbia University, America (1998–1999); He is a party member and Vice President of Chinese Academy of Social Sciences; Among the ﬁrst to be elected as Member of the Chinese Academy of Social Sciences; Researcher and doctoral supervisor; Deputy to the 12th National People’s Congress, member of the Financial and Economic Committee of NPC; Vice President of China Postdoctoral Science Foundation; Member of the 3rd Monetary Policy Committee of People’s Bank of China; Awarded Academician of International Academy for Europe and Asia in 2011; Vice Chairman of the Chinese Monetary Society, Chinese Finance Society, China International Finance Society, China Urban Financial Society, and China Marine Research Association; Awarded “Sun Yefang Prize of Economics Publication and Essay” for ﬁve times; Published 23 monographs and translations and over 400 essays; Chief Editor of six large-tomes of ﬁnancial reference books. He is currently hosting over 40 international-, national- and ministry-level research projects. Ping Li is Director and Researcher of the Institute of Quantitative & Technical Economics, Chinese Academy of Social Sciences; Academic director and leader of technological economics; Key disciplinarian of Chinese Academy of Social Sciences; Professor of the Graduate School of Chinese Academy of Social Sciences; Doctoral supervisor; Director of Chinese Association of Quantitative Economics; Vice Director of Chinese Society of Technology Economics and Chinese Society of Regional Economics; Dedicated in the research on technology economy and industrial economy; Is currently hosting and participating in many research projects on national key economic issues including macro-economic prediction, such as “The Characteristics of China’s Economic Development at
About the Editors
Different Stages and the Selection of Pillar Industries (1996–2050)” and “China’s Energy Development Strategy (2000–2050)”; participating in the feasibility research and project demonstration of some national cross-century key projects, such as “Three Gorges Project,” “South-to-North Water Diversion Project,” and “Beijing-Shanghai High Speed Railway Project”; Expert of the National South-to-North Water Diversion Project Jury; Drafting the overall inspecting report for South-to-North Water Diversion Project; Expert of the National Beijing-Shanghai High-Speed Railway Assessment Panel; Representative for works including Regional and Macro Economic Influence Analysis of Outsize Investment Project, Green Transformation of China’s Industry and Research on Industrial Structural Adjustment, and Optimization and Upgrading in the Twelfth Five-Year Plan Period. Xuesong Li holds a Ph.D. in Economics; Vice Director and Researcher of the Institute of Quantitative & Technical Economics, Chinese Academy of Social Sciences; doctoral supervisor; Vice Director of Chinese Association of Quantitative Economics; Visiting fellow at Bureau for Economic Policy Analysis in Netherlands and the Economic Department of University of Chicago; Main research ﬁelds include analysis and prediction of economic situation and macro- and micro-effect evaluation of economic policy; Published over one hundred essays in Social Sciences in China, Economic Research, The Journal of Quantitative & Technical Economics, and People’s Daily (Theoretical Version), etc.; Edited books and co-edited books including China’s Accession to WTO and China’s Economic Prospect, Macro Economic Effect and Prospect Analysis, The Report of Economic Policies and Simulations, Advanced Econometrics, Research and Application of Quantitative Economics, Frontier Methods, and Empirical Analyses in Quantitative Economics; Awarded the Teaching Excellence Prize; Chinese Academy of Social Sciences Research Excellence Prize; Chinese Academy of Social Sciences Excellent Strategy Information Prize and Sun Yefang Economic Science Prize; Nominated for the national-level talents in the “New Century Talents Project” and an expert entitled to Government Special Allowance (GSA). Ping Zhang is Vice Director and Researcher for the Institute of Economics, Chinese Academy of Social Sciences; Professor of the Graduate School of Chinese Academy of Social Sciences; Doctoral supervisor; Currently Working for the Institute of Economics, Chinese Academy of Social Sciences from 1988 to the present; Hosted and participated in international cooperation with World Bank, Asian Development Bank and World Federation of Trade Unions; Hosted Key Biding Project in Social Science Foundation, Key Project in the Chinese Academy of Social Sciences and national projects for two times; Main research ﬁelds include China’s economic growth, macro-policy and income distribution; Awarded Sun
About the Editors
Yefang Economic Science Prize for co-authored books for three times; his independently authored book, Increase and Sharing and co-authored book, China Economic Growth Frontier was awarded Chinese Academy of Social Sciences Monograph Second Prize; National-level candidate for “New Century Talents Project” of the Ministry of Human Resources and Social Security in 2009; Awarded special government allowance by the State Council for making outstanding contributions to China’s social science research in 2011.
In the ﬁrst three quarters of 2014, the growth rate of China’s gross domestic product (GDP) reached 7.4%, showing a stable trend, and the growth rate for the whole year was 7.3%, less than the 7.7% of 2013. Agricultural development performed well, and the total annual grain output was expected to maintain its high level of 0.6 billion tons, possibly to fulﬁll an “increase for 12 consecutive years.” The development of industrial production kept within a stable range, with a slower growth rate, but positive progress was obtained in the adjustment of the industrial structure. The service industry developed faster than the secondary industry, maintaining a good developmental trend and a continuous increase in its added value as a share of the GDP. There was a slowdown in the growth of investments in ﬁxed assets, while consumption remained the main growth driver for China’s economic growth. The world economy recovered slowly, which led to a lower growth rate of imports and exports in China’s foreign trade. With the constant expansion of the economic scale of China, China’s economic growth has shown a decreasing year-by-year trend since the GDP growth rate bid farewell to two digits in 2011. Under the double pressure from the enhanced constraint of the environment and resources and the uncertainty of international economic recovery, China’s economy has been approaching a “new normal,” which means that the economic structure tends to optimize, the rise of prices tends to slacken, new employment tends to stabilize, and the economic growth rate tends to be within the potential level. In 2015, the complex environment of domestic and foreign development and the uneven recovery of the major economies will probably make it difﬁcult for the driving force of the external demand for China’s exports to rise sharply; the growth of domestic investments should slow and tend toward stability, and consumption should keep a steady growth. Due to the advantages such as the pulling power of the development of the service industry, the “reform dividend” released from the deepening of the reform, and the great potential from the transformation and upgrading, China’s economic growth should maintain its steady and relatively fast rate, which should reach about 7% in 2015.
Economic Analysis and Forecast of China—2014 Autumn Report “Economic Analysis and Forecast of China” Research Group
Abstract Due to the fact that China’s economy was in a stage superimposed with “Growth rate’s shift period, structural adjustment’s pain period, previous stimulative policy’s digestion period”, China’s economic structural reduction had a certain necessity, complexity and rationality. The release of the reform’s dividend will also probably take some time. China’s economy was expected to grow by about 7.3% in 2014, a drop of 0.4% points over the previous year, continuously remaining in a reasonable range of economic growth. China’s GDP was expected to grow by about 7% in 2015. Against the “new normal” background, we need to promote a stable and balanced development of the domestic demand, increase investments in the areas of research and development, the high-end manufacturing industry, the modern service industry, ecological environmental protection, infrastructure, etc., and optimize the investment structure. we also need to promote reasonably rigid and improved housing needs of our residents, increase investments in basic social security, and promote consumption by residents. Keywords China’s economy
“Economic Analysis and Forecast of China” Research Group
Current International Economic Environment and Forecast of China’s Economy from 2014 to 2015 Analysis of the Current International Economic Environment
At the time of this writing, the global economy was in the midst of a sluggish and fragile recovery; the differentiation between America and other developed economies got aggravated and the potential growth rate of the new emerging economies decreased. There were many reasons for this. Developed economies were mired in high debt and new emerging economies reined in their growth speed. Since the international ﬁnancial crisis broke out in 2008, countries worldwide have adopted different stimulus measures in order to seek a new impetus for economic growth and thus tried to avoid the impact of the economic crisis. However, many factors have stacked against the recovery process of the global economy. These factors have rendered it extremely uncertain and unbalanced, such as frequent changes in the economic engine, escalation of partial economic fluctuations, non-synchronization of stimulus policies in different countries and its potential negative effects, and continuing impact of geopolitics on the economy. These dynamics placed potential negative influences on the global economy. Furthermore the global economic pattern is still undergoing structural transformations. Against such a backdrop, it may take a long time for the global economy to rebound. Recently, America’s economy has shown signs of recovery; its economic growth rate has led that of other major developed economies. Influenced by temporary factors such as unusually cold weather and inventory adjustments, America’s economic growth rate slowed down in the ﬁrst quarter of 2014. Judging from recent data, personal consumption has shown a strong growth momentum, having become the main stimulus for the economic growth. Personal investment made a positive contribution to the economic growth while the negative influence of net exports on economic growth has been weakening. The unemployment rate has been declining amidst stability and the nonfarm payroll employment has increased by over 200,000 people over six consecutive months, the former being the lowest and the latter, being the highest since the break-out of the crisis. It is uncertain when the Federal Reserve will raise interest rates and what the ratio of the interest rate increase will be in the future after it bows out of this round of QE. This will greatly influence the international bulk commodity markets and international capital flows. The economic recovery process of the European Union and Eurozone slowed down and entered an enduring period of sluggish growth. The serious imbalances in the Eurozone economic recovery, the impotence of the measure in improving employment, and the dependence on a diverse and quantitative easing policy have hindered their economic growth. Recently, in the European Union the economic climate index has maintained a low level. The Manufacturing Purchasing Managers’ Index and Consumer Conﬁdence Index, showed a month-to-month decrease. Core countries in the Eurozone faced a serious economic downturn; the
1 Economic Analysis and Forecast of China—2014 Autumn Report
economic recovery in Germany came to a sudden halt while the economy in France was still in a slump. Notably, the economic recovery process in the peripheral countries of the Eurozone varied from the core zones. The economic growth in Japan showed a marked decline. After soaring in the ﬁrst quarter of 2014, the gross domestic product annual increase rate of the second quarter decreased by 7.1% after adjustment, breaking the record since the ﬁrst quarter of 2009. The upgrading of the consumption tax became the major reason for Japan’s economic slump. The negative influence of which will become more salient in the future and the “Abeconomics” implemented for two years will face unprecedented challenges. Deflation has slightly improved in Japan’s economy, the Manufacturing Purchasing Managers’ Index has signiﬁcantly recovered and the orders for export goods have increased incrementally. However, the export growth did not reach the expected goal and the cost raise incurred by currency devaluation and consumption tax raise, crippled the capacity of personal consumption. The increase of Japan’s central government debt risk will have a discernable impact on Japan’s long-term interest rate. Its future development affords no optimism. Generally speaking, after rising to the peak of this round of the economic cycle, the economies of the newly emerging and developing countries have developed slowly; their contribution rates to the global economic recovery have grown measurably slower. The markets of the newly emerging economies made some adjustments not only for the negative influence of their unreasonable economic structure, but also the revocation of America’s quantitative easing policy. Particularly the insufﬁcient external demand of developed economies and low pricing of the international bulk commodities contributed to this downturn. Some newly emerging economies of current accounts and ﬁscal “twin deﬁcits” faced accelerating capital outflow that contributed to the slackened economic growth. In addition, the constant currency devaluation, pressure from high inflation, increasing local volatility and pronounced economic fragility were cumulative strains. The risk and uncertainty of the global economy is likely to be compounded by the obvious polarization of economic policy from various countries. The combination of factors such as the current global economic environment and geopolitics are added challenges. The polarization of the global economic policy was mainly characterized by the heterogenization of monetary policy in developed countries. The concurrencies of the normalized monetary policy and non-normalized quantitative easing made it difﬁcult for countries to make reasonable forecasts on the global economic situation, while maintaining effective communication. The imbalance, fragility and mutability of the global economic recovery posed great challenges for China’s foreign trade in the short term and greater demand for China’s strategic decisions in the political and economic world stage in the long term.
“Economic Analysis and Forecast of China” Research Group
China’s Economic Forecast of Major Indexes from 2014 to 2015
At the time of this writing, under the pressures of growing domestic resources, environmental restrictions, and unstable international economic recovery, China has entered a “New Normal” in which its economic growth rate is reaching the potential level, the commodity pricing tends to be moderate, the new employment remains stable and the economic structure tends to be optimal. While China is emphasizing stability and quality in macro-control and enhancing reform and innovation, many in-depth contradictions and problems in economic operations are gradually being solved, therefore optimizing the economic structure. Since China’s economy is currently experiencing three stages simultaneously: “growth-rate shifting stage, structural adjustment-twitch stage and preliminary stimulating policy digesting stage”, its structural slowdown was therefore reasonable, inevitable and complicated. The process of unleashing reform dividends will take some time. It was expected that China’s economic growth would be approximately 7.3% in 2014, 0.4% points lower than that of the year before. The economic growth was still in a reasonable range. Owing to the enhancement of the real estate market adjustments, the forecast in 2014 was 0.1% points lower than that made in the spring of 2014. In this sector, the real estate investment, which accounted for 1/4 of the total investments, had grown measurably slower. Although the government had increased the investment in infrastructure, which accounted for 1/5 of the total investments and was expected to produce an annual growth of more than 20%, it still cannot completely prevent losses or risks incurred by the decline of the real estate investment growth rate because of ﬁnancing restrictions, insufﬁcient project preparations, and low rates of return on investments. In 2014, the tertiary industry grew faster than the secondary industry. It was expected that the added value of the primary industry, the secondary industry and the tertiary industry would increase by 3.8, 7.2 and 7.9%, respectively, but conversely their growth rate dropped to 0.2, 0.6 and 0.4% points respectively, compared to the previous year. They increased the GDP growth rate by 0.4, 3.4 and 3.5% respectively. Their contribution rate to the GDP growth was 4.9, 46.6 and 48.5% respectively, among which the primary industry was almost the same as the year before; the secondary industry dropped from which value the plummeting occurred while that of the tertiary industry had improved for four consecutive years. It was expected that the added value of the tertiary industry would take up 47.1% of the GDP, completing the goal of the 12th Five-Year Plan that “The percentage of the added value of the tertiary industry of the GDP grew from 43% in 201 to 47% in 2015” one year ahead of schedule. The two areas that experienced a decline in the commercial residential building in 2014 were the sales area and sales amount. They declined sharply while the real estate investments increased at a much slower rate. The growing industries were not strong enough to support a stable investment growth and their ﬁnancing cost was