China’s economy: Life after digging
The improvement in China’s fortunes can be traced to three factors. First, the government has started to tackle several ingrained problems. After a long period of overproduction of steel and coal, a campaign to close unused capacity restrained output and pushed up prices. To reduce the property overhang, local governments bought millions of unsold homes from developers and gave them to poorer citizens.
Financial regulators have taken aim at banks’ murky off-balance-sheet loans, and at heavily indebted borrowers such as property developers. Wang Tao of UBS, a Swiss bank, notes that these efforts have given investors more confidence. Chinese shares listed in Hong Kong have risen in value by a third over the past two years. The government has also helped arrange behind-the-scenes rescues of troubled firms. One was in Wuhan. The big local steel company, bleeding cash, merged with its much stronger counterpart in Shanghai in 2016. The combined entity is profitable.
A second factor is that China’s economy is maturing. Growth is bound to slow as China gets richer, but structural changes are also making growth more stable. Thanks in part to a falling working-age population, which peaked in 2011, incomes are growing faster than the overall economy. This, in turn, is rebalancing the economy. Excessive reliance on investment is giving way to consumption. And heavy industry is yielding to services, which now account for more than half of GDP, up from a third two decades ago.
At the same time, China is reaping returns on some big investments of the past decade, such as high-speed rail in densely populated areas. Qin Zunwen, a government economist in Wuhan, says that although local debt shot up, it was almost all tied to infrastructure—half a dozen subway lines, bridges spanning the Yangtze River, elevated expressways—that is now being used. “Yes, it’s much more than we had in the past,” he says. “Has it exceeded our needs? No.”
The final factor has been luck. Robust growth in America and Europe has given Chinese firms a lift. After falling in 2016, exports have rebounded. The rise in global commodity prices has filtered into stronger industrial revenues in China, boosting miners and metal producers. That has helped them service their debts. And it has made the task of deleveraging for the wider economy less daunting. Outflows of hot money have been curbed by tighter capital controls. China has also benefited from a weak dollar since the start of 2017, which has increased the yuan’s appeal.
The coming few quarters are likely to be bumpier, however. The biggest immediate worry is President Donald Trump. The American administration has announced tariffs on about $50bn of Chinese exports and may soon triple that. Exports to America are only a fraction of Chinese GDP, but a trade war between the world’s two biggest economies could wreak havoc on sentiment and supply chains.
The downsides of the campaign to control debt might also become more apparent. Last year regulators focused on the financial system, clamping down, for instance, on borrowing to buy bonds. This year their focus has shifted to government funding. That will have a more direct impact on the economy. China has tried before to rein in profligate local officials, but they have found ways around the rules. A popular recent trick has been to disguise debt in public-private partnerships. Policy this time seems stricter. Subway construction has been halted in cities whose finances were too weak. Tighter liquidity could also weigh on investment. Credit growth is the weakest since 2015.
Over the past decade China’s leaders have revved up investment whenever the economy has slowed beyond their comfort zone. But Xi Jinping, the powerful president, has often said that the quality of growth matters more than the quantity. Officials in Wuhan seem to be getting the message. At recent meetings they have stressed the importance of fostering innovation, cleaning up the environment and keeping a lid on debt. The test is whether they will still be singing that same tune as growth turns down
woe n. 悲哀，灾难 sprawling adj. 蔓延的，杂乱无序伸展的
glut n. 供过于求，吃得过多 murky adj. 阴暗的，含糊的
The article mainly discusses the economic development of China. After a good run of growth, China’s economy has encountered some woes, which is illustrated by the case of Chongqing in the article. However, China has shown its resilience and improve its own fortunes. The reasons for the improvement mainly come down to 3 factors, namely tackling ingrained problems, overall economy’s maturing and beneficial international environment. However, at the end of the article, the author points out that the coming few quarters are likely to be bumpier due to the trade war and the downsides of the campaign to control debt.
As we all know, since 1980s, when the reform and opening began, China’s economy has undergone rapid and tremendous development. Having surpassed Japan, the UK and many other developed countries, we are now the second largest economy in the world.
However, there are also many problems. For example, the overproduction of coal and steel, overcapacity in many industries and bubble economy in real estate product market all aggravate the burden of Chinese economy.
Luckily, with the economic restructure unfolding, the heavy industry is gradually giving way to services, which accounts for over 50 percent in the recent government report.
With the five development concepts and the all-round strategy raised, we can see that China’s economy is maturing and a more stable economic system is expected.
In conclusion, the achievements our country has achieved are awesome. Just as the trade war which broke out recently reveals, we can’t overlook the dangers and potential crisis like the during the process of development. Be prepared for danger in times of peace and always innovate to keep up with the times. Only in this way can we realize the of the rejuvenation of the Chinese nation.