By Zhang Yongjun
In a recent period of time, voices from some foreign media and public figures have complained that economic slowdown in China has considerably affected the global performance.
However, with the release of statistics on the economic performances of both China and the world as a whole, the criticism proves wide of the mark.
With overall economic growth of 6.9 percent in 2015, China remains the top national contributor to the world economy. Indeed, the figure released by the National Bureau of Statistics has drawn numerous positive reviews.
Still, some media have focused on it being “a record low in the past 25 years,” which, to me, seems a superficial statement lacking comprehensive analysis.
First, following the expansion of China’s economic scale, any slowing within a certain range is merely responding to the normal rules of national and regional economic development.
Second, in spite of the decline, China remains a significant performer, having narrowly lost out India’s 7.6 percent, while being far above the approximately 2 percent gains achieved by the developed economies, such as, the United States, Britain, Germany and France. The International Monetary Fund (IMF) estimates world economic growth in 2015 at 3.1 percent, less than half the Chinese figure.
Third, despite the slight decline in growth, China’s contribution to the world remains large. Based on the IMF figure of 3.1percent, it means the Chinese economy makes up 30 percent of the global economy, higher than the contribution of the United States as well as India, its good 2015 performance not withstanding.
Chinese demand secures global market stability
As global economic growth slowed down in 2015, the glut of bulk commodities was aggravated, causing a constant dip in prices.
Some media and institutions attributed the falling prices to China’s downward economic growth that allegedly reduced demand for such commodities. However, the causes of declining prices of bulk commodities amid weakened international demand are complicated.
Let’s take an example of oil. According to the IMF, prices of light crude oil from big suppliers such as Brent in Britain, Fateh in Dubai and Texas in the United States, plummeted by 47.1 percent last year. However, China’s oil imports in that period showed no signs of decreasing; indeed, they grew around 8.8 percent. Besides, the import of iron ore increased by 2.2 percent, mineral and chemical fertilizers were up 16.6 percent and natural and synthesized rubber rose 15.3 percent; there was also big growth in inward shipments of major agricultural products.
Without the buttress of Chinese demand, in fact, the prices of major bulk commodities in the international market would have fallen even more alarmingly; China has been a major force in buoying them up. Therefore, it is ludicrous to make China a scapegoat.
The role of China in promoting stability of the international market has also been demonstrated by outbound travel by massive numbers of Chinese tourists and their high consumption at their chosen destinations that have directly yielded market growth of the target countries. Statistics show South Korea received 6.11 million visits by Chinese tourists, which accounted for 40 percent of foreign travel in the country last year.
The per capita consumption of these Chinese tourists was US$2,170, generally distributed for accommodation, public transportation and shopping, roughly totaling US$22 billion or making up 2.6 percent of South Korea’s gross domestic product (GDP).
Outbound investments, incentives to the world economy
China has not only made contributions to the world economy with its own growth, but also through outbound investment.
According to United Nations Conference on Trade and Development, cross-border direct investments grew 36 percent in 2015, generally from the inflow of capital to the developed economies; direct foreign investments in the developing countries only increased by 5 percent. Except for Asia, the rest of the developing world saw negative growth of more than 10 percent last year.
In spite of the gloomy economic conditions, China’s outbound investments, particularly to developing countries and regions, still increased rapidly, with last year witnessing a record high of US$118.02 billion, or an increase of 14.7 percent year-on-year.
Direct investments from the Chinese companies to 49 countries along the routes of the “Silk Road Economic Belt and Maritime Silk Road” initiative reached US$14.82 billion, registering a year-on-year increase of 18.2 percent. Most of the countries are underdeveloped and troubled with constant outflow of foreign capital that has greatly affected the indigenous economic performance.
Merits and value of the RMB
China’s contribution to the stable world economic growth can be additionally attributed to the stability of the RMB, which did not depreciate as much as many other currencies.
In 2015, the exchange rate between the Euro and U.S. dollar depreciated by 16.5 percent and the Japanese yen to U.S. dollar by 12.5 percent. The depreciation even expanded to India, as the Rupee to U.S. dollar rate fell by 3.9 percent.
As a result, the actual exchange rate of the RMB to U.S. dollar considerably appreciated. According to the Bank of International Settlement (BIS), the average monthly index of the RMB-US$ exchange rate appreciated by 9.7 percent.
Despite the decline of China’s exports to a certain extent, the country did not choose seductive policies for the depreciation of its currency; instead, it took on the responsibilities of a major country seeking stability of the world economy.
Apparently, rather than affecting the global economy, the Chinese economy has played a significant role in pushing forward its growth.
The author is the deputy director of the Economy Research Office of the China Center for International Economic Exchanges.
The article is first published in Chinese and translated by Wu Jin.