The Chinese government has the means to effectively tackle the economic setbacks because of the trade war with the United States, believes a group of current and former government advisers.
While doing so, Chinese policy makers would also need to hasten the pace of reforms in some of the critical industries such as technological innovation and private ownership protection to foster long term growth of the Chinese economy, the group also said.
According to Justin Yifu Lin, former chief economist of the World Bank, was at the forefront of making the above call and stressed on the potential for strong growth of the Chinese economy because of its comparative advantages in new technology, despite of the slowing down of growth in the economy to a level that is the lowest in a decade at 6.5 per cent in the third quarter of this year.
“China can maintain a 6.5 per cent growth over the next two years and average annual growth of 5.5 per cent from 2020 to 2030,” he told the third National Development Forum at Peking University.
One of the critical concerns of the financial market – the trade war with the US and its impact on the domestic economy, was apparently downplayed by Lin.
“Assuming the worst-case scenario – that the entire US$500 billion worth of Chinese goods [imported into the US] is taxed – our research model calculates that it would knock just a 0.5 percentage point off Chinese growth and a 0.3 percentage point off US growth,” he said.
Forums such as this one at Peking University have been for long used to create support for and securing public confidence in government policies and this has been noticed more in recent times because Chinese authorities have been trying to get some stability into the country’s economy.
The Chinese government has been maintaining the economy would still in a position to sustain strong growth and avoid the middle-income trap and become the largest economy of the world surpassing the United States economy with a few decades time.
The large domestic market of China can be the key for the country to counter the impact of the trade war. Some of the focus areas under that head could be increasing the demand for upgrading manufacturing, enhancing infrastructure, making more investments in environmental protection and expanding urbanisation.
“If the external environment turns bad and downward economic pressure increases, we can keep [domestic] investment at a certain level to support employment and consumption,” Lin said.
There have been pessimistic sentiments on the rise about the possible success of the 90-day trade truce that China and the US agreed upon earlier in the month between Chinese President Xi Jinping and US President Donald Trump, following the arrest of the CFO of Chinese tech giant Huawei in Canada at the behest of the US. There are some sections expressing concerns about the incident upsetting the delicate trade talks.
According to Lu Feng, a professor of economics at Peking University, said that China should draw up policies for reforms in some of the key sectors such as the housing market, the hukou system of household registration, and protection for private firms. These according to him would help to eliminate hurdles in the path of the country achieving sustained growth.
(Adapted from SCMP.com)