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Morgan Stanley Chief Economist: China's Economy Won't Decline
China's economy grows 8.1 percent in the first quarter of this year, a rise of 0.7 percentage points over that of the fourth quarter of 2000, announced Qiu Xiaohua, deputy director of China National Bureau of Statistics Wednesday at the news briefing by the Information Office of the State Council.
On the same day, Andy Xie, chief economist of Morgan Stanley Dean Witter (Hong Kong), pointed out in his article that despite the widespread downturn of Asian economy, China's economy is not at all affected by the downhill trend. Thanks to the powerful FDI and fund raised from international market, which has significantly made up the insufficiency in export trade, and as China has less dependence on its IT industry, she's not much influenced by the slackening of the US economy.
As said in the article, China's GDP growth is mainly driven by its exports, FDI, realization of property trading and government investment. In the year 2000, China's exports increased US$55 billion, government investment grew by US$20 billion and FDI remained unchanged. In 1999, the capital trading of the stock market went up by US$3.6 billion over 1998 (usually there is a one-year delay in its influence on the demand). The total amount of the capital trading of stock market surged to US$78.6 billion which promoted a US$90 billion increase in its GDP growth.
In 2001, China's export growth will go up to US$20 billion or a rise by 8 percent, said Xie. Its FDI will mount up by U$10 billion, of which, contractual FDI volume will increase 50 percent, property volume will realize a rise by US$24.3 billion, and government investment, US$20 billion. The gross volume of the growth will hit US$74.3 billion. Therefore, irrespective of the degenerated export situation, China's economic growth rate will only be slightly lower than last year.
Under the influence by the US economy, China's economic growth in the second and third quarters will see a slight decrease, estimated Andy Xie. Its export growth in the first quarter was 14.7 percent since it included small proportion of IT exports.
Xie forecasted that the exports will see a drop in the second quarter, so will the economic growth rate. He predicted the annual economic growth to be of 7.5 percent. The biggest difference in the economy between China and other countries is its various motive forces for its economic growth, and exports will by no means be the only drive for its economic growth in 2001.
Xie thought that more uncertain factors would occur in China's economy in 2002. Under the depressed situation of the market, China will have to intensify the momentum in its domestic property trading to make up the slowdown in foreign exchange trade. If the world economy revives in 2002 as expected, China's export will pick up again.
At present China is paying more attention to two risks: risk of investment by transnational companies and that of the conflict between China and the US. The transnational companies are now shrinking their capital expenditure worldwide. Will they cut down the investment in China too? We've found but slight traces after contacting some of the companies. Pressures resulted from the worldwide currency stringency made shrink the marginal profits and the transnational companies have to cut down the costs so as to make their profits ensured. One of the methods is to move their production bases in Asian-Pacific region to China.
Although the Sino-US plane collision was not settled in a satisfactory way, Xie said, we must look upon the problem from another angle. The United States has not much interest in launching wars in Asia. Most of the Asian countries also hope that the Sino-US relationship will see a steady development. China has always given her first priority to its economic development in the external relationship issues.
Besides, China and the US have numerous ties in their economy and trades. To confine China's trade will only lead to a considerable damage to the economic benefits of the US. The US transnational companies only occupy 5 percent in its proportion to the Chinese economy. As long as the Sino-US economic link maintains, there's not much to be worried about for the market.
By PD Online Staff Du Minghua
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