Lin Yifu: China’s Economy Eye-catching Last Year and Promising This Year_ Counsellors' Office of the State Council
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Lin Yifu: China’s Economy Eye-catching Last Year and Promising This Year

Source: Date: 2017-03-14

Lin Yifu, CPPCC Delegate
"I am optimistic about China’s economy this year.” At each year’s CPPCC session, Lin Yifu, a CPPCC delegate and economist, would share his views and forecasts on China’s economy.

"I fully agree to the economic plan laid out in the government work report for 2017, which will continue the supply-side structural reform and prioritize efforts to shore up weak links in the economy.” As he made forecasts on China’s economy this year, Lin opened his laptop to let figures speak for themselves. “At the beginning of 2016, the World Bank made forecasts for the GDP growths of major countries. However, the US, EU, Japan and other developed countries failed to deliver the predicted growth rates at the end of the year. Among developing countries, India grew by 6.6%, much lower than the projected growth of 7.8%. By comparison, China’s growth target last year was 6.5%-7% as set in the government work report, and the World Bank projected a 6.7% growth. The actual performance lived up to the expectation.”

As can be seen from the figures cited by Lin, China’s economic performance was undoubtedly eye-catching among major economies in 2016.

This year’s government work report set the 2017 GDP growth target at 6.5%, a slowdown for the 7th consecutive year since 2010 and also the lowest target since 1990. What does this tell?

"We cannot certainly lose sight of our own problems. The unfavorable external environment also has a big impact on China. As the largest trading nation and second largest economy, China cannot afford to ignore the impact of the global economic situation on China. That said, I remain optimistic.” To make his case, Lin read a set of data from his computer. “In 2010 and 2015, China’s growth was 10.6% and 6.9%; 7.5% and -3.8 for Brazil; 4.5% and -3.7% for Russia. As for India, which has been growing at a similar speed to China, its growth has also dropped, from 10.3% in 2010 to 6.5% in 2016. Singapore and South Korea have, too, experienced similar slowdown since 2010.”

"So, China’s slowdown is more driven by external and cyclical factors, coupled with domestic structural problems,” concluded Lin.

External problems cannot be addressed or controlled. To ensure growth, domestic potential must be tapped. Li believes that the key drivers of China’s growth are investment and consumption.

Lin said that despite the overcapacity, there is still ample space for industrial upgrading and enormous opportunities for investment. “Though China has better infrastructure than other developing countries, there is a lack of infrastructure inside cities. Investment is needed for environmental protection and cultural development,” said Lin.

When it comes to consumption, Lin pointed to China’s household savings rate, which is as high as 45% and ranks among the top in the world, and the vast foreign exchange reserves. If we can make full use of these and maintain a certain level of investment, more jobs will be created. As China is advancing the supply-side structural reform, Li suggested that priority is given to shoring up the weak links. “If we shore up the weak links as a priority in the structural reform, it will kill several birds with one stone, so to speak. More importantly, it will have a systemic effect,” said Lin.