By SALLY HUI GUO
As the representative of APDS, I was honored to be invited to attend “Forecast Asia: China’s Ambition Grows as the Global Economy Slows” forum organized by Asia Society Southern California on February 4, 2015. The forum brought together experts on China’s economic development from the fields of politics, business and scholarship, with the focus on forecasting China’s growth performance in the background of the big-scale market economy reform.
The panel started with defining the economic slowdown that/which China currently is going through, and discussed whether it is more resulted from short-term factors such as foreign investment decrease and anti-corruption campaign, or rather a long-term structural slowdown. The panelists tend to agree that China is experiencing a transitional period where the previous overinvestment in property market is being corrected, and in spite of the relatively low growth rate, China is aiming for a healthier economy through economic structure upgrade and market reform.
But at the same time, the course of China’s growth is determined by the implementation of marketing reform announced by President Xi Jinping on Chinese Communist Party’s Third Plenum in November 2013, which aims at putting the market as the No.1 force in allocating resources. According to “Avoiding the Blind Alley”, an Asian Society Policy Institute report, if the reform succeeds, China can expect 7% growth rate in the next few decades, or else the growth rate would be much lower, making it more impossible to rebalance the economy. While there is an widespread idea that China needs to maintain a high speed growth to ensure social stability, the panelists believes that so far Chinese officials and society are comfortable with the slowdown, as more job are created in growing sectors such as service sector.
The discussion then moved towards to the strategies designed for the undergoing market reform, focusing on both economic and political paths. In terms of financial market regulation, panelists believe that China is unnoticeably yet steadily moving to a more transparent and trading-efficient style, especially with the development of IPO market and the trading of RMB in the last 2 years. Increasingly aware of the importance of credit and the rule of law, government’s implicit guarantee tends to step out of mainstream, a sign need to be read by international investors.
In the political realm, the panelist expressed their concerns and worries. Few solid political strategies have been announced so far regarding the privatization of State-own-companies, especially for local governments. Many compared President Xi’s current reform to Deng Xiaoping’s reform in 1990s, whose success was partly resulted from the policy design that benefit the reform implementers. At that time, local governments got real stake to move to the market because they could retain the tax they produced. This strategy came to an end during Zhu Rongji’s tax reform in 1994, and the fiscal situation is even worse nowadays as local officials heavily rely on the loans given to property projects, whose value is shrinking. Therefore, allocating legitimate tax revenue for local governments is vital in ensuring the political constituency for the reform.
The anti-corruption campaign initiated by the top officials of CCP is another political highlight in this economic restructuring. While the panelists believe that the campaign carried out by the second regeneration of PRC’s founder truly aims at restoring the integrity and respect of the party, it seems less promising as the campaign is carried out by the party itself not the legal system. The resistance inside the CCP is another uncertain factor, which call for more support within the top administration.
The panel discussion concluded with the impact of China’s rise in the world. The panelists agree that China is ambitious to become dominant in the world, at the same time also gradually aware of the importance of maintain good relationship with U.S. and its neighboring countries. Cooperation and partnership with China in economy is a win-win solution.