Page 44 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
1979, with real annual GDP growth averaging 9.5 percent and a steep decline in the value of the yuan versus the
through 2017, a pace described by the World Bank as dollar, heightening worries about the growth outlook.
“the fastest sustained expansion by a major economy The key take-a-ways at this point are:
in history”. Such growth has enabled China, on average,
to double its GDP every eight years and helped raise an • Economic activity in China remains resilient, with
estimated 800 million people out of poverty. China has GDP growing by 6.9 percent in 2017 and 6.8 percent
become the world’s largest economy on a purchasing in the first quarter of 2018.
power parity basis, manufacturer, merchandise trader,
and holder of foreign exchange reserves. This in turn • While consumption continues to drive growth,
has made China a major commercial partner of the US. investment growth has rebounded from the lows in
China is the largest US merchandise trading partner, 2017, particularly in the private sector.
biggest source of imports, and third-largest US export
market. Despite China’s forty-year history of widespread • However, the long-term trend is slower investment
economic reforms, Chinese officials contend that China growth accompanying slower economic growth,
is a “socialist-market economy”. This appears to indicate as an important part of China’s “new normal” is the
that the government accepts and allows the use of free process of rebalancing away from investment toward
market forces in a number of areas to help grow the consumption.
economy, but the government still plays a major role in
the country’s economic development (CRS). • Even with the slowdown, investment is still high by
international standards, so China’s main challenge
China continued to climb up Maslow’s hierarchy of is not to raise the growth rate of investment, but to
needs and is well on its way to meeting targets for 2020 ensure that it goes to sectors and firms that are more
on GDP, per capita income and erasing poverty. China productive.
is on course to become a “moderately well-off society”.
The Chinese economy has been stable and improving At this point, Maslow would place China somewhere
over the past decade and its performance is better than between seeking its esteem needs and self-actualization.
was expected. The main worry for 2019 will be how the The country has not reached its full potential, but it has
global economy will react to a tightening of monetary become proud of its accomplishment.
policy in the US, with the Federal Reserve expected
to raise interest rates three or even four times during Slowing Economy
the year. For China, hitting the 2020 target of doubling
2010 GDP and per capita income is an important one, 2018 was a stormy year for the Chinese economy,
since it will come in time for the 100th anniversary as growth slowed, economic reform stalled, and
of the founding of the Communist Party of China in trade tension with the US increased. However, China’s
2021. This will be the first year when economic policy economic reformers see an opportunity in this adversity
will be informed by Xi Jinping Thought on Socialism to reinvigorate internal reforms for long-term growth.
with Chinese Characteristics for a New Era. This places Key to their success will be their ability to sell trade
emphasis on the Party ’s leadership in economic concessions sought by the US as beneficial to their
management as well as the market’s role in resource reform agenda, while winning the confidence of a
distribution and economic development that benefits cautious domestic private sector. The current push for
the population as a whole, in addition to supply-side economic reform dates back to President Xi Jinping’s
structural reform (TMG). November 2013 blueprint – a call to “let the market play
a decisive role in allocation of resources”, transforming
Then, China’s economic growth cooled in the third the economy into a model based on high levels of
quarter 2018 to its weakest pace since the global domestic consumption, private-sector-driven innovation
financial crisis in 2008, with regulators pledging further and sustainable development. Implementation began
policy support as a years-long campaign to tackle in 2014-15, but the party’s confidence in the market was
debt risks and the trade war with the US began to bite. smashed by the implosion of the Chinese equity markets
Chinese authorities are trying to navigate through in 2015. Since then, there has been a momentous
numerous challenges, as the trade war fears have slowing in the overall reform program. Fears propelled
sparked a blistering sell-off in domestic stock markets by China’s ballooning debt-to-GDP ratio prompted
44
1979, with real annual GDP growth averaging 9.5 percent and a steep decline in the value of the yuan versus the
through 2017, a pace described by the World Bank as dollar, heightening worries about the growth outlook.
“the fastest sustained expansion by a major economy The key take-a-ways at this point are:
in history”. Such growth has enabled China, on average,
to double its GDP every eight years and helped raise an • Economic activity in China remains resilient, with
estimated 800 million people out of poverty. China has GDP growing by 6.9 percent in 2017 and 6.8 percent
become the world’s largest economy on a purchasing in the first quarter of 2018.
power parity basis, manufacturer, merchandise trader,
and holder of foreign exchange reserves. This in turn • While consumption continues to drive growth,
has made China a major commercial partner of the US. investment growth has rebounded from the lows in
China is the largest US merchandise trading partner, 2017, particularly in the private sector.
biggest source of imports, and third-largest US export
market. Despite China’s forty-year history of widespread • However, the long-term trend is slower investment
economic reforms, Chinese officials contend that China growth accompanying slower economic growth,
is a “socialist-market economy”. This appears to indicate as an important part of China’s “new normal” is the
that the government accepts and allows the use of free process of rebalancing away from investment toward
market forces in a number of areas to help grow the consumption.
economy, but the government still plays a major role in
the country’s economic development (CRS). • Even with the slowdown, investment is still high by
international standards, so China’s main challenge
China continued to climb up Maslow’s hierarchy of is not to raise the growth rate of investment, but to
needs and is well on its way to meeting targets for 2020 ensure that it goes to sectors and firms that are more
on GDP, per capita income and erasing poverty. China productive.
is on course to become a “moderately well-off society”.
The Chinese economy has been stable and improving At this point, Maslow would place China somewhere
over the past decade and its performance is better than between seeking its esteem needs and self-actualization.
was expected. The main worry for 2019 will be how the The country has not reached its full potential, but it has
global economy will react to a tightening of monetary become proud of its accomplishment.
policy in the US, with the Federal Reserve expected
to raise interest rates three or even four times during Slowing Economy
the year. For China, hitting the 2020 target of doubling
2010 GDP and per capita income is an important one, 2018 was a stormy year for the Chinese economy,
since it will come in time for the 100th anniversary as growth slowed, economic reform stalled, and
of the founding of the Communist Party of China in trade tension with the US increased. However, China’s
2021. This will be the first year when economic policy economic reformers see an opportunity in this adversity
will be informed by Xi Jinping Thought on Socialism to reinvigorate internal reforms for long-term growth.
with Chinese Characteristics for a New Era. This places Key to their success will be their ability to sell trade
emphasis on the Party ’s leadership in economic concessions sought by the US as beneficial to their
management as well as the market’s role in resource reform agenda, while winning the confidence of a
distribution and economic development that benefits cautious domestic private sector. The current push for
the population as a whole, in addition to supply-side economic reform dates back to President Xi Jinping’s
structural reform (TMG). November 2013 blueprint – a call to “let the market play
a decisive role in allocation of resources”, transforming
Then, China’s economic growth cooled in the third the economy into a model based on high levels of
quarter 2018 to its weakest pace since the global domestic consumption, private-sector-driven innovation
financial crisis in 2008, with regulators pledging further and sustainable development. Implementation began
policy support as a years-long campaign to tackle in 2014-15, but the party’s confidence in the market was
debt risks and the trade war with the US began to bite. smashed by the implosion of the Chinese equity markets
Chinese authorities are trying to navigate through in 2015. Since then, there has been a momentous
numerous challenges, as the trade war fears have slowing in the overall reform program. Fears propelled
sparked a blistering sell-off in domestic stock markets by China’s ballooning debt-to-GDP ratio prompted
44
