China Source of Economic Power, not Crisis: RUC president

Shanghai, largest city in China, is the epitome of China's economic development.

The recent fluctuations in the global stock and commodities markets have triggered speculations of an impending crash similar to the 2008 financial crisis. Some are blaming China for the downturn.

Chen Yulu, an economist and president of Renmin University of China (RUC), countered this argument during a recent interview with the People’s Daily. Chen said that China has laid a solid foundation for global economic growth through exports and real economic growth. Meanwhile, China has contributed to the stability of the international financial market with its stable exchange rate and currency swap.

China boasts the world’s largest manufacturing and consumer market. According to Chen, China’s current-account surplus has dropped from 10 percent of total of GDP to some 2 percent. Not only does this fall within the internationally-recognized level of 4 percent, China’s contribution to the re-balance of global trade has taken up 40 percent since the last crisis.

China witnessed a new round of foreign investment even as the global capital market slumped, which stabilized the international investment environment. According to data issued by the United Nations Conference on Trade and Development, the Chinese mainland surged to No. 3 overall for direct foreign investment in 2014, compared to 17th in 2007.

China also has enhanced global industrial restructuring though trade re-balance, effective exchange rate appreciation and price adjustments. In addition, China itself is going through an industrial restructuring that will provide the driving force for a worldwide restructuring.

China has become the core source of global economic growth since 2008, leaving the US far behind. Between 2008 and 2014, China’s contribution rate reached 42.68 percent, 30.78 percentage points higher than that of the US and 31.21 percentage more than G20 countries.

China realized economic growth of 7 percent in the first half of this year, and its contribution rate to the world economic growth is at some 30 percent. The macro-forecast from RUC researchers believes that China will still be the largest contributor to the world economy over the next few years.

Chen also noted that we should understand China’s new normal through current world economic development. As the global economy is sluggish in its development, China cannot help but be affected. Meanwhile, some deep-seated domestic contradictions are appearing. The Chinese economy is stepping into the new normal and realizing a transition period. During this process, the manufacturing industry is experiencing changes in growth patterns and domestic consumption.

At the turning point, fluctuations are inevitable. At the same time, structural reform is providing more benefits. It is still possible for China to realize medium- to high-speed economic development in the future, Chen noted.