January23,2018:AworkerchecksnewenergyvehiclesrollingofftheproductionlineatanSGMWfactoryinLiuzhouCity,southernChina’sGuangxiZhuangAutonomousRegion.byZhangAilin/XinhuaOnJuly31,2018,thePoliticalBureauoftheCommunistPartyofChina(CPC)CentralCommitteeheldaconferencetoanalyzeChina’scurrenteconomicsituation.Theconferencealsoemphasizedthatworkmustbedonetostabilizeemployment,finance,foreigntrade,foreigncapital,investmentandexpectations.HowisChina’scurrenteconomicsituationlooking?WhydidtheCPCCentralCommitteeintroducethe“sixstabilities?”
ChallengesforChina’sRealEconomy
AccordingtofiguresreleasedbyChina’sNationalBureauofStatisticsonJuly16,thecountry’sGDPexpandedby6.8percentyear-on-yearinthefirsthalfof2018,downby0.1percentagepointfromthesameperiodlastyear.Growthratesofbothinvestmentandconsumptionenduredsignificantdecreases.
Intermsofprices,althoughpricegrowthrateisnothigh,theupwardpressureonpricingisbecomingincreasinglyevident.China’sconsumerpriceindex(CPI),akeygaugeofinflation,demandsspecialattention.InJuly,CPIgrew2.1percentyear-on-year,upby0.2percentagepointfromJune.Thegrowthrateofconsumerpriceshaswitnessedamodestincrease.Analystsbelievethereisapossibilitythatpriceswillcontinuetogoupinthesecondhalfoftheyear.
China’sproducerpriceindex(PPI),whichmeasuresthecostsforgoodsatthefactorygate,hasalsorisen.PricingtrendsforconsumergoodsarecloselyrelatedtoCPI.SinceAprilthisyear,thegrowthratesforthepricesofconsumergoodssuchasfoodandclothinghaveseenmonth-on-monthrises.
RiskofEscalatingTradeWar
TradefrictionbetweenChina,asanexport-orientedeconomy,andtheUnitedStatesremainsanimportantfactorinfluencingChina’scurrenteconomicsituation.Theescalatedtradewardirectlyaffectspeople’sexpectationsforChina’sfutureeconomicdevelopment,whichinturnaffectstheirimmediatedecisionsoninvestmentsandconsumptioninChina.
Intermsofeconomics,Chinausedtoserveasthe“world’sfactory”intheinternationalarena.ItexportedabundantcommoditiestotheU.S.andEuropeandenjoyedlargetradesurpluses.However,withChineseexportcommoditiesplacinggreaterimportanceonbrandingandcontaininghighertechnicalcontentatpresent,ChinaismovingtowardstheU.S.onthevaluechainatahighspeed.Thus,acompetitiverelationshipwasformedbetweenthetwoparties.
TheNecessityof“SixStabilities”
Consideringboththeinternationalanddomesticmacroeconomicsituations,theintroductionofthe“sixstabilities”istremendouslyimportant.TheconferenceheldbythePoliticalBureauoftheCPCCentralCommitteepointedoutthatinthefirsthalfof2018,growthratesformanyeconomicgaugesdropped,butnotemployment.However,accordingtothemacroeconomicfiguresreleasedbyChina’sNationalBureauofStatisticsonAugust14,employmentalsowitnessedadeclineinJuly.Thus,itisimportanttostabilizeemploymentandinvestment.
Stabilizingforeigntradeandforeigncapitalisalong-termeconomicissue.ThissituationisdictatedbyChina’sdevelopmentalstage,andthetotalglobaldemandisnotafigurethatcanexpandeasily.Inthefuture,competitionwillbecomeevenmoreintense.
Sincethebeginningof2018,China’sfinancialriskhasmounted,makingitharderforfreed-upfundstoflowintotherealeconomy.Ingeneral,stabilitiesinemployment,finance,foreigntrade,foreigncapital,andinvestmentarecomplementarytoeachother.
Now,Chinaneedssteadilygrowingforeigntrade,anditsreformandopeningupshouldbedriventoadeeperleveltomeettheever-growingconsumptionupgrade.Besides,stableforeigninvestmentsarehighlysignificanttoChina’scurrencyexchangerate,foreigntradeandinternationalimage.
Duringthisperiod,whenChina’seconomyisfacinggreatdownwardpressure,stablepoliciesandsolideconomicdevelopmentprovideguaranteesandenhanceenterprises’expectationsforthefuture.
TheauthorisaprofessorwiththeSchoolofEconomics,PekingUniversity.