China’s insurance market to double in 10 years, Swiss Re CEO says

The size of China’s insurance industry is expected to double in the next 10 years amid strong economic growth, making the country an even more important market for the group, said Christian Mumenthaler, group CEO of Swiss Re.

China’s economy continued its steady recovery in April, official data released on Friday showed.

The country is expected to maintain an annual economic growth rate of about 5 percent, continuing to rank among the world’s fastest-growing economies, Mumenthaler said in an exclusive interview with China Daily.

China’s insurance market is growing faster than its economy, Mumenthaler added.

“The size of premiums could double in 10 years, so we want to be part of that. I’m very excited about the market opportunities in China,” he said.

What makes China’s treasury bonds ‘special’ as nation eyes quality growth?

Illustration: Tang Tengfei/GT

Illustration: Tang Tengfei/GT

The issuance of China’s ultra-long special treasury bonds has given those concerned about the nation’s economy a glimpse of the country’s pursuit of Chinese modernization through high-quality development.

Yet regrettably, opportunistic individuals on the outside seized the opportunity to chant about the “collapse of the Chinese economy.” Such allegations are ridiculous. 

China’s plan to issue the first batch of 1 trillion yuan ($140 billion) in ultra-long-term treasury bonds starting on Friday will help shore up investment and spur consumption, but this doesn’t mean the Chinese economy is facing numerous difficulties and challenges that require serious measures to stimulate growth.

Some Western commentators claim that China’s 2024 growth target of about 5 percent has put pressure on the nation to unleash more stimulus. Such a misreading reflects Western elites’ serious lack of understanding of China’s economic development.

China’s GDP grew by 5.3 percent in the first quarter of 2024, well above market expectations. Steady growth lays a solid foundation for the economy to achieve the target of growing by about 5 percent for the whole year.

China’s 5.3 percent growth in the first quarter was much higher than what many Western economies achieved in the same period. It’s a little bit ironic that while Western elites said “the Chinese economy is on the verge of collapse,” an indisputable fact is that China remains a major driving force for economic growth in the Asia-Pacific region and the world. 

That is not to say China faces no challenges and risks at all. Countries as large as China – and the entire world, for that matter – face mounting challenges and risks such as increasing geopolitical tensions, lower demand in developed countries, an uptick in trade restrictions and elongated supply chains.

In the face of challenges, China is actually making honest efforts to tackle them. As the world’s second-largest economy, China has been able to maintain economic stability.

There is no doubt that the issuance of China’s ultra-long special treasury bonds will help stabilize market expectations, elevate market confidence and inject new momentum into the Chinese economy, but this is not the whole story. The bonds are designed to be used to “support the implementation of major national strategies,” which makes them different from previous special treasury bonds.

To build a modern socialist country in all respects, we must, first and foremost, pursue high-quality development. The economy is undergoing a transition from old to new growth drivers, in which the optimization of structure, and the robust development of new quality productive forces, provide limitless possibilities.

Policies to encourage economic development are different in different eras of history. With the continuous growth of the Chinese economy, it is imperative to enhance and improve macroeconomic regulation with innovative tools and ideas to support long-term high-quality development. The issuance of China’s ultra-long special treasury bonds is an attempt to adapt to an optimized and upgraded economic structure and economic needs of the country.

The Government Work Report of 2024, which was approved during the two sessions earlier this year, stated that in order to “systematically address funding shortages facing some major projects for building a great country and advancing national rejuvenation,” it was proposed that, starting this year and over each of the next several years, ultra-long special treasury bonds be issued. 

“These bonds will be used to implement major national strategies and build up security capacity in key areas,” the report said.

China has turned to special treasury bonds before, in 1998, 2007 and 2020.

This issuance of China’s new ultra-long special treasury bonds is different from previous bond issuances, because the funds raised through the new bond sales are reportedly set to support scientific and technological innovation, integrated urban-rural development, coordinated regional development, food and energy security, and the high-quality development of the population.

The plan to issue new ultra-long special treasury bonds from 2024 is a proactive approach to pursue high-quality development and develop new quality productive forces, instead of forced measures to stimulate a “stagnant economy.”

The author is a reporter with the Global Times. [email protected]

China’s steel sector embraces industrial upgrade for high-quality development amid challenges

The China Iron and Steel Association holds a press conference addressing the industry’s performance in the first quarter on April 30, 2024. Photo: Yin Yeping/GT

The China Iron and Steel Association holds a press conference addressing the industry’s performance in the first quarter on April 30, 2024. Photo: Yin Yeping/GT

China’s steel sector, an important gauge of the national economy, is advancing toward high-quality development by optimizing its product structure, as reported by the China Iron and Steel Association (CISA) during a press conference addressing the first-quarter industry operation report.

Specifically, the proportion of high-end manufacturing steel, including automobiles, household appliances, and photovoltaics, increased from the 42 percent in 2020 to 48 percent in 2023, and has maintained a further upward trend since the beginning of 2024, according to the CISA.

The positive trend reflects a significant acceleration in the restructuring of the steel industry’s operating structure, industry insiders noted.

Meanwhile, businesses are contending with multiple hurdles, including diminished market demand, declining steel prices, and escalating iron ore expenses. External factors, such as heightened scrutiny targeting the Chinese steel industry overseas, compound the profitability challenges faced by enterprises, the Global Times learned from the industry body.

Speaking at Tuesday’s press conference, Jiang Wei, vice chairman and secretary general of the CISA, said that China’s steel industry is embracing high-quality development which have borne positive results so far.

The optimization of steel-related product structures is accelerating in response to ever-growing demand from burgeoning industries such as car manufacturing, shipbuilding, home appliance production, as well as the wind and solar power sectors.

The production upgrade is reflected in the corresponding export volume. In the first quarter, China’s high value-added product exports accounted for more than 35 percent, Jiang said.

Efforts are underway to enhance intelligence in steel production and management within the industry. According to a report by the CISA, surveyed companies have invested approximately 38.5 yuan per ton of steel in digital and intelligent transformation initiatives so far this year. This represents a notable year-on-year increase of 23.9 percent.

There were 40 percent of surveyed companies applying 3D visual simulation technology in their main production lines, another reflection of the industry digitalization and upgrade, according to the CISA.

In addition, domestic steel companies are actively pursuing green transformation,  another key element of high-quality development. As of April 23, 2024, a total of 136 companies had either completed or partially completed ultra-low emission transformations and undergone assessment monitoring.

Challenges persist in China’s steel industry, primarily stemming from a significant structural imbalance between market supply and demand. Difficulties also include declining steel prices and high iron ore prices, according to the CISA.

In the first quarter, the national crude steel production came to 257 million tons, a year-on-year decrease of 1.9 percent. Meanwhile, nationwide consumption of crude steel was 232 million tons, a decrease of 4.7 percent year-on-year, indicating a surplus in steel supply over demand.

National steel exports reached 25.8 million tons in the first quarter, marking a year-on-year increase of 30.7 percent, while the average export price stood at $789 per ton, reflecting a decline of 33.4 percent year-on-year, suggesting thinner profit margins for companies despite strong demand overseas.

Meanwhile, the high price of iron ore, a key raw material for steelmaking, remained elevated, serving as another factor affecting company profits. The primary cause behind this is the lack of bargaining power in international pricing negotiations, Shi Hongwei, deputy secretary general of the CISA, said on Tuesday.

Inventories of domestic steel companies were also on the rise. As of mid-March, key steel enterprises reported steel inventory levels of 19.53 million tons, the highest level since the beginning of this year and the highest level in nearly four years, trailing only the 21.41 million tons during the 2020 pandemic period, according to the CISA.

The high inventory reflects the juxtaposition of weak market demand with strong market expectations for the economy, which have supported stockpiling.

Looking ahead, China’s steel industry remains optimistic despite certain and temporary challenges.

Despite the challenges, the steel industry’s structure is continually optimizing in pursuit of high-quality development, as industry insiders said, with manufacturing figures being a reflection.

In April, China’s Manufacturing Purchasing Managers’ Index stood at 50.4 percent, down 0.4 percent from the previous month, remaining in the expansionary zone for two consecutive months. This indicates the continued recovery and development momentum of the manufacturing industry, according to data released by the National Bureau of Statistics Service Industry Survey Center on Tuesday.

As China further ramps up its investment in new energy and the development of infrastructure, which are major consumers of steel, and implements policies promoting the trade-in or the replacement of old equipment with new, there will be a boost in steel demand, industry insiders said.

Consultancy expert: China’s economy to have steady recovery

China’s economy showed signs of stabilization at the beginning of the year, laying the foundation for a steady recovery throughout the year, said Ben Simpfendorfer, a partner at consultancy Oliver Wyman.

“I think the economy is stabilizing,” Simpfendorfer said in an exclusive interview with China Daily. “The foundations are there for recovery.” While China’s growth target of around 5 percent for this year seems challenging, Simpfendorfer said he believes the goal is “still achievable if the real estate sector begins to stabilize”.

Dismissing the speculation that China’s economy is showing signs of peaking, he said the “long-term growth prospects still look very good”.

“China hasn’t peaked. It’s evolving,” he added. “The country will remain a global manufacturing hub and a global innovation hub. China matters for the global business and the global economy. There isn’t another China out there at this point.”

Expert: 2024 growth target is achievable

China’s economic outlook is poised to improve in the following months, buoyed by robust fiscal spending, and the country’s growth target of around 5 percent for 2024 is achievable, according to a renowned economist.

Huang Yiping, dean of Peking University’s National School of Development, told China Daily in an exclusive interview that the nation’s economy is relatively stable. “There is hope that the economy may continue to improve, given that the government will expand its fiscal spending and provide more support to economic growth in the coming months.”

Huang called for more efforts to further boost economic recovery and stabilize the employment rate, which will bolster consumer confidence and increase incomes for households.

Click the video to learn more.

China enters ‘show’ time, demonstrating resolve on opening-up

Photo: Qi Xijia/GT

Visitors at the Hainan Pavilion at CICPE Photo: Qi Xijia/GT

Following intensive visits to China by foreign CEOs in March, China has entered a week of international trade exhibitions. This highlights the potential of China’s dynamic consumer market and the country’s unswerving commitment to opening-up.

Chinese officials have taken the opportunity to drive home the point that the door to China’s opening-up will only get wider, and representatives from leading multinationals told the Global Times that they are optimistic about the development of the Chinese consumer market, which is set to drive their revenue growth and instill new positivity into the global economy.

The 4th China International Consumer Products Expo (CICPE), Asia’s largest premium consumer products expo, began on Saturday in South China’s Hainan Province.

The six-day event, which lasts through April 18, will host more than 4,000 brands from 71 countries and regions to showcase their products for global consumers. More than 55,000 purchasers and professional buyers are expected to attend the event, with more than 300 brands launching about 1,000 new products during the expo.

In tandem with the CICPE, the Spring session of the China Import and Export Fair, or Canton Fair, will be held from Monday to May 5 in Guangzhou, South China’s Guangdong Province. A total of 137,000 buyers from 215 countries and regions have completed pre-registration for the mega trade show, according to China’s Ministry of Commerce.

The week of trade expos comes as the Chinese economy began the year on a solid footing, with some major international financial institutions raising their Chinese GDP projections for 2024. The resilience of the world’s second-largest economy and the attractiveness of its vast consumer market and manufacturing products offer a strong rebuttal to some Western media outlets’ hype about the Chinese economy reaching its peak, analysts said.

The international trade exhibitions allow the world to further identify and trust the China market and its economic prosperity, and also demonstrate the status of China’s economy, which plays a spearhead role in the world economy amid a complex global political environment, Cao Heping, an economist at Peking University, told the Global Times on Sunday.

Cao said that the observations and impressions of the investors who participate in the two trade shows will be conveyed abroad and boost confidence in the global market.

These overseas investors gain valuable firsthand information on China’s investment potential from these interactions, and they will be noticing the advantages of the China market in the unstable global political and economic environment, Cao noted.

Goldman Sachs and Citi recently released separate reports stating that China’s economy had gotten off to a good start in 2024. It is expected that the GDP growth target of “about 5 percent” set by the Chinese government can be achieved, and the forecast for China’s GDP growth rate for the full year has been raised, according to the Xinhua News Agency.

“The current wave of a backlash against economic globalization may be challenging, but the world will never return to a state of isolation. China will always be an important opportunity for global development. The door to China’s opening-up will only get wider,” said Peng Qinghua, vice chairman of the Standing Committee of the National People’s Congress, said in welcoming remarks for the CICPE on Saturday.

“The Chinese economy is resilient, dynamic and full of potential, and its strong long-term outlook remains unchanged,” Sheng Qiuping, Chinese vice minister of commerce, said in remarks on Saturday.

To many exhibitors, the CICPE, the first major international exhibition held in China so far this year, offers opportunities for global companies to explore the massive market in China.

“Expos such as the CICPE are wonderful opportunities to promote Ireland and what it has to offer, and they are excellent platforms for Irish companies to introduce themselves to Chinese consumers. Quite a few Irish companies return again and again to these expos,” Ambassador of Ireland to China Ann Derwin told the Global Times in an exclusive interview.

Ireland, the country of honor for the CICPE with a dedicated exhibition venue, aims to show its scientific and technological innovation, education, investment, tourism and culture.

With a population of 1.4 billion and a 400 million strong middle class, China has a per capita GDP exceeding $12,000, making it one of the most promising consumer markets in the world, analysts said.

Representatives of leading multinationals told the Global Times that they are optimistic about the development of the Chinese consumer market, which is set to drive their revenue growth and instill new positivity into the global economy.

Volkswagen Group China (VGC) demonstrated its commitment to Chinese customers with a spectacular lineup of 13 models at the CICPE.

“Building on our existing successful partnership with Hainan Province, and riding on the tremendous opportunities presented by the Hainan Free Trade Port, Volkswagen Group China is committed to contributing to the e-mobility and green development of Hainan,” Zhang Lan, VGC vice president of sales and marketing, told the Global Times on Saturday.

Since the beginning of 2024, China has accelerated its pace of opening-up, with the announcement of the 24-point measures to stabilize foreign investment and a range of visa exemption policies to facilitate business travel.

Efforts are also being strengthened to boost consumption by promoting equipment upgrades and consumer goods trade-ins, bringing new opportunities for foreign companies.

Jack Chan, EY China chairman, told the Global Times on Saturday that China is an important engine for global economic growth for all sorts of businesses, and China’s continued efforts to open up will provide more “motivation” for investors to tap into this massive market.

“We believe that the foreign investment performance in China this year will maintain a high-quality development trend,” Chan said. “We look forward to enhanced foreign investment in high-tech industries, the digital economy and sustainable development.” 

Retail sales in the first two months of 2024 hit 8.13 trillion yuan ($1.14 trillion), increasing 5.5 percent year-on-year, according to the National Bureau of Statistics.

China is due to report its first-quarter growth data this week.

Debunking flawed Western narrative – ‘China’s economy peaks’

A view of the skyline of Beijing's CBD area. Photo: VCG

A view of the skyline of Beijing’s CBD area. Photo: VCG

Bearish views about China’s economy appear from time to time but are always proved wrong. Recently, some Western politicians and institutions have come up with the “China peaks” theory, which may seem novel but is exactly the same as the so-called “End of China’s economic miracle” theory back in 2013. 

History is a long-cycle development process, and arbitrary claims of “peak” and “end” often go against logic and common sense.

Over the past decade, the Chinese economy has been moving forward and experiencing waves of development, despite the Western hype shifting from “disappointing” to “near collapse.” In 2023, China’s GDP surpassed 126 trillion yuan, with per capita disposable income at 39,218 yuan, more than double the figures of 56.8 trillion yuan and 18,311 yuan in 2013. The 5.2 percent growth rate is also significantly faster than the US’ 2.5 percent, the eurozone’s 0.5 percent, and Japan’s 1.9 percent. With its contribution to world economic growth continues o exceed 30 percent, China remains an important engine of global economic growth.

In the face of the rosy data and solid facts, where did the “China peaks” theory come from?

First, the “pandemic impact” rhetoric says that the COVID-19 pandemic has accelerated the process of peaking.

Indeed, the three-year COVID-19 pandemic has had a significant impact on both the world and the Chinese economy. But historically, no matter how severe a pandemic is, it is a short-term issue. No matter how big the impact on the economy, it will not fundamentally change its long-term development trend. China was the first major economy that saw growth resume after the pandemic. Now, its “scar effect” on China’s economy has faded. Last year, the total retail sales of consumer goods in China exceeded 47 trillion yuan, up 7.2 percent year-on-year, indicating that consumption is again driving economic growth.

Businesses are also booming. Boosted by last year’s May Day holidays and National Day holidays and this year’s Spring Festival, renowned domestic brands have introduced new products, various places have promoted local tourism, and a variety of new consumption scenarios have emerged. Whether it is the night economy in Changsha, or the Hangzhou Asian Games, China’s economic recovery is clear for everyone to see. This surging energy is propelling China’s high-quality development forward with renewed vigor.

Second, the “demographic dividend” narrative argues that, with China’s total population now peaking, the disappearance of the demographic dividend will make China’s growth miracle of the past 40 years unsustainable.

In recent years, significant changes have taken place in the size and structure of China’s population. But there are still about 865 million people aged 16 to 59, who are at working age. With the labor participation rate at a relatively high level in the world, China still has abundant labor resources and its demographic dividend hasn’t gone away. Furthermore, in terms of economic development, the input of the labor force is important, but the input of effective labor is even more important. Effective labor can be defined as the product of the number of workers and their level of education. Essentially, compared with the size of the population, the quality of the population is a key determinant of long-term economic growth.

At present, the average years of education of the working-age population in China have risen to 11.05 years, and the number of people that have had higher education has exceeded 240 million. China boasts the largest number of science and technology professionals, as well as research and development personnel globally. China’s large number of science and engineering graduates has formed an “engineer dividend.” Overall, despite the aging population, effective labor has been increasing every year, transitioning from a “demographic dividend” to a “talent dividend.” This offers solid human resources foundation for high-quality development.

Third, it has been claimed that the US’ technological suppression and decoupling will hinder China’s development. This argument suggests that China is still in the process of technological transformation, and Western tech blockades will impact the development of China’s high-tech industry and stymie China’s economic rise.

Can technological suppression block China’s development path? The question has been answered by history more than once. China has been repeatedly besieged and suppressed, but has been able to overcome difficulties even when the economy was still underdeveloped. Today, given the solid material and technological foundations in China, the so-called “small yard high fence” attitude will not stop China’s innovation and development.

Today, China remains committed to keeping its doors open and continues to advance in technology through independent development. China has increased its investment in technological innovation and achieved remarkable progress.

For instance, the domestically produced C919 large passenger aircraft has entered commercial flights. The homegrown large cruise ship has also started commercial operation, and the Shenzhou series of space missions have achieved remarkable success.

China’s cutting-edge technology field is constantly accumulating energy, demonstrating the strength of Chinese innovation. China has the largest number of global top-100 technology innovation clusters in the world, and emerging technologies such as artificial intelligence and blockchain are growing in importance. New-energy vehicles, lithium batteries, and photovoltaic products have become new highlights of China’s manufacturing industry.

China is leveraging the advantages of a new type of national system with concentrated efforts and resources for important events or projects, with abundant talent, a huge market, and complete industrial support. The innovation drive and development vitality of China are flourishing, and new quality productive forces are emerging, demonstrating strong support for high-quality development.

Fourth, it has been claimed that a slowdown in economic growth suggests that a “peak” has been passed. This claim argues that the miracle of high-speed growth of the Chinese economy brought about by special domestic and international opportunities is unsustainable, and that China will fall into a growth stagnation predicament.

After more than 30 years of high-speed growth with an average annual GDP growth rate of 9.9 percent, the growth rate of the Chinese economy has indeed slowed down in recent years, but this is a natural result of the evolution of economic development. 

Throughout history, economies have typically experienced a natural decline in growth rates, transitioning from periods of rapid growth to more stable, moderate growth. This trend is commonly observed in the development of modern economies and is considered an inevitable occurrence. 

In the industrialization process of various countries, such as Germany, Japan and South Korea, after experiencing two to three decades of high-speed growth, the pace of the growth will slow down. This is an entirely normal phenomenon.

Moreover, the phased transition of China’s economic growth is intertwined with the long-term structural adjustment of the world economy and the integration of a new round of industrial revolution. If China continues to pursue high-speed growth, it would not only go against economic laws, but also exacerbate the existing contradictions of traditional extensive growth methods, bringing many risks and causing economic imbalance, lack of coordination, and unsustainability. 

Transitioning to a new stage of growth also means changing the driving forces. Outdated productivity continues to decline, while advanced productivity continues to emerge, forming new growth momentum.

Observing the theme of high-quality development in the Chinese economy, one should not only look at the size, but also the quality. Combining growth data and efficiency data from recent years, the Chinese economy has not peaked at all, but has achieved a qualitative and effective improvement while overcoming many difficulties. 

Currently, China’s comprehensive advantages in human resources, capital formation, infrastructure, and industrial system are outstanding, and the potential for economic development is huge.

For example, the savings rate is still at a high level; a relatively complete and large-scale infrastructure network has been formed; and a large-scale, comprehensive, and strong complementary industrial system has been established. According to calculations by many domestic and foreign research institutions, China’s potential growth rate can still reach around 5 percent for the long run.

Those who repeatedly curse the Chinese economy have had their views rebutted by the facts. Whether it is simply applying Western theories to analyze the Chinese economy, exaggerating short-term issues, having a subjective bias, or acting out of narrow self-interest, the smears are based on misconceptions about the Chinese economy.

The Chinese economy has been advancing steadily, with firm goals and adjustments that keep pace with the times.

Looking into the future, China’s economy has solid support from its huge material and technological foundations, advantages in supply capacity with a complete range of industrial sectors, potential demand advantages from the huge domestic consumer market, talent advantages, advantages in emerging industries, and advantages in continuous institutional innovation through reform and opening-up.

In developing new quality productive forces, the growth potential of the Chinese economy will continue to be unleashed.

China’s economy is currently at a crucial stage of transitioning toward high-quality development. During this process, various problems and challenges are inevitable, such as insufficient effective demand, overcapacity in some sectors, weak social expectations, and numerous hidden risks. China is addressing these problems, making effective use of ample policy space, and continuously introducing targeted measures to resolve them. The performance of China’s economy in 2023 was the best proof.

American scholar George Friedman, who announced the “end of the Chinese economic miracle” a decade ago, wrote that “no one country can replace China, but China will be replaced. The next step in this process is identifying China’s successors.”

Ten years on, China has recorded ever outstanding and profound development achievements: The next China is still China!

The article is an economic commentary first published in The Economic Daily. [email protected]

Well calibration of fiscal, monetary policies to ensure 5% GDP growth in China

A view of the Lujiazui area in Shanghai Photo: VCG

A view of the Lujiazui area in Shanghai Photo: VCG

A well-calibrated fiscal and monetary policy combination, being crafted and orchestrated by Chinese government, will help resolve the intrinsic problems hidden in China’s economy. An aggressive fiscal stimulus, coupled with proactive while prudent monetary policy, is generally thought to provide the economy with sustainable energy, shepherding it to grow by around 5 percent in 2024. 

Independent economists of many international organizations give high marks for Chinese economic policymakers’ learning and wit in blending the monetary and fiscal policies in the past four decades to shore up rapid economic growth, and at the same time successfully resisted the cyclical pressures of inflation and deflation. 

Entering 2024, China’s economy has to overcome the “scar effect” left by the COVID pandemic, including a relatively lackluster domestic consumption and a churning real estate market. Amid the lingering concern about another public health upheaval, the people now tend to snap shut their pocketbooks, and the millennials and generation Z are increasingly hesitant to raise children.

Under these circumstances, the traditional days of steadily growing consumer prices are gone, as China witnessed several months of negative CPI growths in the second half of 2023. To deal with the deflationary pressure, China’s central bank moved to reduce the bellwether loan prime rates (LPR) of both one-year and five-year lengths. Last month, the central bank went aggressive, cutting the five-year LPR by a full quarter percentage, which also has the effect of ramping up the country’s humdrum housing sales as mortgage rates are slashed too. 

Meanwhile, the policy-makers decided to introduce proactive fiscal stimulus measures to fuel up public spending and economic growth. 

In 2024 alone, at least 4.9 trillion yuan of central and provincial government bonds will be sold, with the proceeds to be channeled to building up important public infrastructure projects and fostering new quality productive forces to meet China’s massive market demand for home-grown advanced semiconductor chips, newest AI and algorithm innovations, nationwide 5.5-G mobile network coverage and highly efficient digital business platforms – able to catapult China’s economy to new heights of growth before 2050.

China is determined to “choose transition from high rates to high-quality of growth,” said International Monetary Fund Managing Director Kristalina Georgieva at the just concluded China Development Forum held in Beijing. In her speech to the event, she remarked that China has entered a new era of economic growth, and the country will continue to be a key driver of and a contributor to global economic growth in the coming years.

And, renowned US economist Nicholas Lardy, senior fellow at the Peterson Institute for International Economics and a former senior fellow at the Brookings Institution, told Chinese media that it is unwarranted for many media pundits in the West to disseminate the narrative that “China’s economy is collapsing” and faces a catastrophic outcome. Instead the economy is recovering, and last year’s 5.2 percent GDP growth “is impressive” among major economies. 

For a long time, one of the important reasons why the Chinese economy has been able to scale new heights constantly by overcoming domestic difficulties and withstanding external headwinds is its deep understanding of economic laws, and the decision makers’ creative ways to exploring new and potent growth drivers, as well as the country’s firm determination to implement systemic restructuring, such as the country’s unswerving focus on developing clean renewable energies and battery-powered electric trucks and cars.  

Georgieva thought highly of China’s green development. She described China as a global leader in deploying renewable energy with enormous potential, adding that China was making rapid progress in green mobility. China’s remarkable development success has delivered tremendous benefits to hundreds of millions of people in the world, she said.

Georgieva said that China’s high-quality development still has a bearing to deepening marketed-regulated reforms and giving priority to private sector growth. Deep structural reforms can enhance the conditions for entrepreneurship, innovation and economic performance. For example, a boost to government finances at the macro level could allow some tailored micro changes in taxation policies on businesses to foster fast growth of new enterprises, aligned with the central bank’s monetary policy to increase liquidity through reserve ratio reductions and interest rate cuts. 

And, ramped-up government spending is a key component of aggregate demand that can be strategically important for economic development. China’s central government has announced the issuance of new ultra-long special treasury bonds in each of the following several years to focus on funding major national projects. No matter it is the development of industrial parks, transportation hubs, public services and highly educated and skilled Chinese work force, government spending is indispensable to underpin the growth of future strategic industrial lines. 

The drivers of demand include household consumption of goods and services, private investment, government investment and net exports. As to augmenting China’s domestic consumption – a pivotal part of economic growth, the government has pledged to implement a national drive to provide incentives to encourage trade-in of old household appliances, cars and furniture with new models. The replacement of old automobiles, inefficient in fossil fuel use and polluting the air, with Chinese brand-new electric vehicles will also significantly help improve China’s urban environment. And, Chinese local authorities are encouraging citizens to have more family outings and leisure time to increase cultural and tourism spending.

Regarding foreign trade, despite the headwinds of geopolitical tensions which are affecting trade and capital flows, China saw a robust take-off of foreign trade in the first two months this year, largely thanks to the high-quality and low-price of made-in-China goods, like heavy machinery, home appliances, electric cars and a wide variety of electronic devices. In 2024, China’s total exports of goods will likely grow by 6-8 percent over 2023. Investment, domestic spending and export will guarantee the economy to expand by around 5 percent this year.

IMF head Georgieva said she is confident that China and the world can tackle the challenges this globe is now facing and they can always cooperate to create a more prosperous future in this century. 

The author is an editor with the Global Times. [email protected]

China’s commitment to innovation shines bright on quality development: Nobel laureate Edmund Phelps

Economists' VIEW logo

An employee inspects a cellphone chip at an electronic product research and development company in Ningbo, East China's Zhejiang Province on February 22, 2024. The company's products are exported to more than 80 countries in Europe and Latin America, and its overseas order book is full through the second quarter of 2024. Photo: VCG

An employee inspects a cellphone chip at an electronic product research and development company in Ningbo, East China’s Zhejiang Province on February 22, 2024. The company’s products are exported to more than 80 countries in Europe and Latin America, and its overseas order book is full through the second quarter of 2024. Photo: VCG

Editor’s Note: China’s economy is undergoing a critical transformation toward quality growth. During the process, there are many pessimistic views from Western media about China’s economy. However, China has maintained stable growth despite challenges and reaffirmed its commitment for promoting innovation and high quality economic development. How should we objectively observe China’s economic transformation? Nobel Laureate, Professor Edmund Phelps, author of books Mass Flourishing:  How Grassroots Innovation Created Jobs, Challenge, and Change and The Logic of Growth, shared his perspective with the Global Times.

GT: China’s economy is undergoing a critical transformation toward quality growth. How do you perceive the role of innovation in China’s economic growth?

Phelps: The generation of innovation is the main driving force behind China’s economic transformation and upgrading. For China’s economy to further the transition toward high-quality development, there is nothing more important than achieving a higher level of independent innovation.

China used to produce products innovated by other countries, but that has changed with the emergence of corporate giants like Alibaba, Tencent, and ByteDance. China has achieved admirable innovation-driven development in both emerging and traditional sectors including finance, artificial intelligence, and bio-tech.

Currently, China’s independent innovation keeps improving for a few reasons. First, Chinese enterprises are actively studying foreign products and methods, which inspire them to create new products and methods. Second, with the increase in wage levels, Chinese exporters need to develop new products and technologies in order to survive. Third, the level of education has increased, allowing more people to benefit from the new economy. Fourth, local governments have become more supportive of policies that support independent innovation.

GT: The growth of exports of the “new three items” in China’s foreign trade has surpassed 1 trillion yuan in 2023. China has cultivated around 400,000 high-tech enterprises. China’s number of intelligent factories ranks first in the world. How do you view these breakthroughs? How do you view China’s progress and advantages in promoting innovation?

Phelps: For a long time, people have believed that sustained growth and development require continuous innovation. Since the reform and opening-up, China’s innovation mainly relied on imports, but in the past decade, independent innovation has become very important. China can introduce foreign innovative products at an acceptable cost, but it should also shift its focus toward independent innovation.

In recent years, it has been crucial to shift from “Made in China” to “Innovated in China.” This kind of technological progress is needed to enhance productivity and consequently increase wage levels. No one can predict the contributions of leading innovative Chinese enterprises to the global economy, but I believe they will make significant contributions to the global economy.

There is evidence now that a large number of Chinese people have the ability to innovate. Data on independent innovation in China and G7 countries shows that China was already ranked fourth in the 1990s. In the following decade, the rankings of the UK and Canada declined, with China rising to second place, not far behind the US.

Currently, innovation from the US is much less than it was in the past, and there is almost no innovation coming from Europe. Therefore, China can become a major source of global economic innovation. This is a valuable opportunity for China to become a major leader in innovation.

GT: The 2024 Government Work Report is sending an important signal for high-quality development, emphasizing the acceleration of the development of new quality productive forces, actively nurturing emerging industries and future-oriented industries, as well as deepening the promotion of innovation and development in the digital economy. How do you view China’s commitment and potential in promoting innovation?

Phelps: China is currently making many high-tech innovations, and continuing to strive in this area is a wise move for the country. As time goes on, we will see what progress China makes in this regard.

China has taken various measures to promote innovation and entrepreneurship, such as significantly reducing the procedures for establishing new companies, building numerous schools, and facilitating the entry of foreign professionals into China. Equally important is China’s recognition of the importance of allowing competition in the economy. There is clear evidence that China is moving toward the path of entrepreneurship and innovation. The government has reiterated its determination to protect new patents and it is well known that China registers a considerable number of new companies every week.

GT: How can China further unleash its innovative potential to boost its economy?

Phelps: If China wants to achieve great economic flourishing, it must provide extensive opportunities for innovation. The obstacles faced by China, the US, and Europe are the same. In order to continue driving economic growth and achieving mass flourishing, we need to address some fundamental issues, such as how to mobilize mass innovation and how to enable people to achieve self-development.

China needs to accelerate its pace of independent innovation by:

Cultivating entrepreneurs, who will find the direction for business development in a world full of uncertainty and use their abilities to solve new problems.

Cultivating innovative companies, which require imagination, curiosity, and deep insight into new trends. 

China needs to change its perception of independent innovation. Innovation does not end with the conception of new products or methods; it requires the widespread application of these new ideas into commercially viable products or methods. 

To achieve large-scale innovation, China needs to provide a suitable environment of incentive, establish necessary systems, and remove barriers to innovation. Only when the people are energetic can innovation occur, and the national economy can develop. 

To achieve faster development, China needs to cultivate more scientists, and these scientists need to apply their research to the creation and commercialization of new products and methods. This is essential for increasing productivity.

GT: Some media claim that China’s economic growth is peaking, how do you view such opinions? Do you have confidence in China’s economic prospects?

Phelps: Since the reform and opening-up, China has improved productivity and wage levels in multiple dimensions. In the coming years, China will further enhance productivity and wages through grassroots innovation. As more Chinese people engage in innovation, the inclusiveness of the Chinese economy will inevitably expand, leading China toward economic prosperity. 

China can certainly achieve a high level of economic prosperity through independent innovation. Almost the entire world is facing a shortage of innovation capabilities, with some countries experiencing this for decades. Most countries have not found a way out. Now, China is taking the lead in the path of mass innovation. 

GT: China’s capacity to educate and attract human capital keeps improving, with the largest number of STEM graduates. How do you perceive this advantage contributing to the promotion of innovation?

Phelps: The current wage growth level in China has already been able to meet people’s basic material needs. People are beginning to highly value whether they are in an environment full of innovative spirit, and they are starting to pursue a sense of achievement through innovation. By shaping a vibrant innovative environment that stimulates people’s minds to think about a series of new issues, China will become a world leader in innovation.