China’s industrial economy did not stabilize: it declined in the first quarter of 2016, according to the latest CKGSB survey of over 2,000 industrial firms nationwide. The survey, led by CKGSB Professor of Finance Gan Jie, shows that overcapacity and weak demand remain biggest challenges for China’s industrial economy. The Business Sentiment Index, a major indicator of the survey, stood at 46 in Q1 2016, a one point increase from Q4 2015, but still indicative of contraction. The BSI is the simple average of three diffusion indices including current operating conditions, expected change in operating conditions and investment timing.
In previous years as provincial-level GDP data rolled in, China’s top leaders and provincial officials could take a certain satisfaction from the bountiful increases in wealth displayed therein. But were they to spend a bit more time with the data, such pleasure would likely lead to a state of confusion, if not consternation—the sums, quite literally, don’t add up. The total of provincial-level GDP has outstripped the national figure year after year, a problem that has only gotten worse over time. Consequently there has been a rise in the number of indicators that purport to give a true reflection of the situation.
Asia is seeing growing rivalries—and also the enduring influence of the US. In the post-war years it was perhaps easy to take for granted the deep and vast sway held by the US in Asia—from its significant role in the Asian Development Bank to its closeness to regional powerhouse Japan. China’s recent rise has reconfigured the terms of politics, economics and trade in Asia—and the world. That has informed the US’s much-discussed ‘pivot’ to Asia, a key plank of which has been the Trans Pacific Partnership (TPP). Are China’s prospects in trade and regional influence hampered because it is not a signatory of the TPP?
The days of double-digit growth in China are long gone now. And as China shifts to a new economic model, the term ‘the New Normal’ is often used to describe this supposedly more sustainable economic growth. The consensus is that the New Normal will usher in a steadier, stronger, more sustainable economy led by consumption and services. But when you break it down to a granular level, what does the term really mean? More importantly, what does the New Normal mean for the level of economic growth being pursued in China? What implications does it have for rebalancing the economy and different industries?
Dating back to 1953, China’s system of Five-Year Plans has long been dismissed as anachronistic, but it remains crucial to guidance of the economy. Five-Year Plans occupy a central place in China’s complex system of governance. For just as China’s economy has reformed and adapted in the last 37 years, so too has the planning framework. There are clear signs that planning will remain an indispensable component of Chinese economic and political development for years to come.
China’s economic growth has dropped to a 24-year low. There’s not much room for further decline as Beijing has reaffirmed its goal of doubling the GDP between 2010 and 2020. This means growth of 6.5% a year. The conventional methods of boosting growth are no longer deemed dependable. Beijing is now pinning its hopes on unlocking another round of “economic dividends” by carrying out reforms to make the entire system more market-driven. But can China carry out economic transformation without hurting growth? We ask Anthony Saich, Director of the Ash Center for Democratic Governance and Innovation at Harvard Kennedy School.
The heady days of double-digit economic growth rates are now history in China, and even achieving 7-7.5% growth is unthinkable. The stock market has been on a roller coaster ride. The Renminbi has fallen dramatically and the trade numbers are down too. Li Wei, Professor of Economics at CKGSB, feels that to solve this China must implement structural reform. The downside: it will be painful. The upside: the Chinese economy will be better off in the long run.
A common view of China’s central planning is that it has failed; since China grew faster when its reforms replaced planning with markets, the sooner China gets rid of Five Year Plans the better. This view is rather simplistic. Evidence shows that the Five Year Plans have played an important role in China’s progress. It was the fastest way for China to mobilize capital and labor for industrialization. And when China transitioned from a planned to a market economy and the two worked in parallel, it maintained employment, livelihoods, infrastructure and the supply of basic goods, hence a stable foundation for the nascent market economy.
It is a truth universally acknowledged that a Chinese state-owned enterprise (SOE) in possession of industrial assets must be in want of reform. China’s reforms have released many assets into private ownership, but large blocks remain in corporations linked either to the central government or to a local government via chains of corporate ownership. The State Council’s latest guidelines on the reform of state-linked enterprises envisage more private ownership, some mergers, and a greater role for state asset management companies. But would that ensure better corporate governance?
There are stark regional disparities between the inland and the coastal regions in China. Can the less-developed regions ever catch up with the coast?