China struggles in quest to adjust
By Geoff Dyer
Published: January 24 2011 17:41
Hu Jintao paused briefly for dramatic effect and fixed a sly grin on the American reporter who had just posed an awkward question about China’s intentions towards the US. “We wanna buy all kinds of stuff from you,” he purred.
Actually, that is not strictly true. It was Barack Obama, the US president, who did the reporter-teasing during his White House press conference with Mr Hu, his Chinese counterpart, and he was talking about selling American stuff to China. But the message about Chinese purchasing power was very much the subtext of Mr Hu’s trip to the US last week.
Adopting the same dexterity with numbers that allowed the White House to announce $45bn in new Chinese export orders, Mr Hu told a business audience about the 14m jobs that Chinese demand was creating around the world, as well as the $600bn in savings that American consumers had enjoyed from cheap Chinese manufacturing. The week before, Li Keqiang, Chinese vice-premier, told everyone he met on a tour of Europe about his country’s $1,400bn import bill.
The message they were trying to convey was pretty clear: China is now one of the leading drivers of global economic growth and is making a decisive contribution in lifting the world from the financial crisis. Why would you encourage it to introduce policies that might put this growth at risk?
As it happens, there are plenty of US companies that might nod in agreement – at least the ones who sell to Chinese consumers. Every year, tens of millions of Chinese are being pulled by rising incomes into a modern consumer class that probably includes more people than the entire population of the US. These new Chinese consumers are spending their weekend at the General Motors dealership, popping into the Apple store and queuing at their local Walmart. They are buying all kinds of new stuff.
Yet a flourishing Chinese consumer market is not the same thing as an economy that is rebalancing. The reality is that last week’s figures for gross domestic product underlined how difficult it is to shift China’s economic model.
Take the trade numbers, which provide much less comfort than Beijing would allow. Chinese officials point to a 7 per cent decline in the dollar value of the trade surplus last year and the steep drop in the current account surplus, from 11 per cent of GDP in 2007 to just short of 6 per cent last year.
Yet even at this reduced level, the Chinese surplus is still well above the 4 per cent surplus that Japan was running in the 1980s, which prompted so much anguish among its trading partners.
Exports continue to boom, as Chinese companies expand market share and find opportunities in other developing countries.
Meanwhile, China’s surplus could easily balloon again this year if commodity prices drop or the government decides to slow investment projects to restrain inflation, thereby reducing Beijing’s import bill.
China’s growth drivers also have a familiar look. Investment is still the main contributor to GDP, aided by another year of epic bank lending. But consumption provided its lowest contribution to growth since 2003 and continued to decline as a share of overall spending. Growth in urban incomes, which was in double figures in 2009, fell to 7.5 per cent last year.
This is the paradox of China’s economy: demand for modern consumer goods is rising sharply as urban Chinese get richer, but consumption as a whole continues to play a more modest role than in any other big economy.
China’s leaders have talked for five years about shifting the growth model towards consumption and this will be the central goal of the plan for the next five years. Yet large and politically important parts of the economy remain addicted to the cheap land, energy and credit formula that has fuelled such high investment rates.
Rebalancing is proving much tougher than Mr Hu let on to his US audiences.
Actually, that is not strictly true. It was Barack Obama, the US president, who did the reporter-teasing during his White House press conference with Mr Hu, his Chinese counterpart, and he was talking about selling American stuff to China. But the message about Chinese purchasing power was very much the subtext of Mr Hu’s trip to the US last week.
Under pressure over its mercantilist currency policy and the seeming abrasiveness of some of its foreign policy moves, China is trying to seduce its critics with tales of booming domestic demand back home. While Mr Hu was making his way around Washington, Beijing announced that growth last year reached another eye-popping 10.3 per cent.
Adopting the same dexterity with numbers that allowed the White House to announce $45bn in new Chinese export orders, Mr Hu told a business audience about the 14m jobs that Chinese demand was creating around the world, as well as the $600bn in savings that American consumers had enjoyed from cheap Chinese manufacturing. The week before, Li Keqiang, Chinese vice-premier, told everyone he met on a tour of Europe about his country’s $1,400bn import bill.
The message they were trying to convey was pretty clear: China is now one of the leading drivers of global economic growth and is making a decisive contribution in lifting the world from the financial crisis. Why would you encourage it to introduce policies that might put this growth at risk?
As it happens, there are plenty of US companies that might nod in agreement – at least the ones who sell to Chinese consumers. Every year, tens of millions of Chinese are being pulled by rising incomes into a modern consumer class that probably includes more people than the entire population of the US. These new Chinese consumers are spending their weekend at the General Motors dealership, popping into the Apple store and queuing at their local Walmart. They are buying all kinds of new stuff.
Yet a flourishing Chinese consumer market is not the same thing as an economy that is rebalancing. The reality is that last week’s figures for gross domestic product underlined how difficult it is to shift China’s economic model.
Take the trade numbers, which provide much less comfort than Beijing would allow. Chinese officials point to a 7 per cent decline in the dollar value of the trade surplus last year and the steep drop in the current account surplus, from 11 per cent of GDP in 2007 to just short of 6 per cent last year.
Yet even at this reduced level, the Chinese surplus is still well above the 4 per cent surplus that Japan was running in the 1980s, which prompted so much anguish among its trading partners.
Exports continue to boom, as Chinese companies expand market share and find opportunities in other developing countries.
Meanwhile, China’s surplus could easily balloon again this year if commodity prices drop or the government decides to slow investment projects to restrain inflation, thereby reducing Beijing’s import bill.
China’s growth drivers also have a familiar look. Investment is still the main contributor to GDP, aided by another year of epic bank lending. But consumption provided its lowest contribution to growth since 2003 and continued to decline as a share of overall spending. Growth in urban incomes, which was in double figures in 2009, fell to 7.5 per cent last year.
This is the paradox of China’s economy: demand for modern consumer goods is rising sharply as urban Chinese get richer, but consumption as a whole continues to play a more modest role than in any other big economy.
China’s leaders have talked for five years about shifting the growth model towards consumption and this will be the central goal of the plan for the next five years. Yet large and politically important parts of the economy remain addicted to the cheap land, energy and credit formula that has fuelled such high investment rates.
Rebalancing is proving much tougher than Mr Hu let on to his US audiences.
Copyright The Financial Times Limited 2011
0 comments:
Publicar un comentario