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Op-ed: China heading for hard landing? Nonsense!

By Mei Xinyu (People's Daily Online)    10:10, February 01, 2016

What is the wake-up call of the disturbance caused by reports about George Soros shorting China? Definitely not the Chinese economy is heading for a hard landing, because what he claimed fundamentally goes against the truth.

Take China’s economic growth as an example. Although the 6.9 percent growth in 2015 was the lowest for China in 25 years, it is still much higher than other major economies including the U.S.

The growth rate of the U.S. in the first three quarters last year was 2.9 percent, 2.7 percent and 2.2 percent respectively, not even half of China’s performance.

The most persuasive data lie in the constant increase of China’s consumption.

The U.S. saw 3.3 percent growth in the first two quarters last year in per capita consumption and a 3.2 percent increase in the third quarter. The data were even regarded as proof of dynamic growth in the US economy since they hit a record high compared to recent years.

However, total retail sales of consumer goods in China last year saw a 10.7 percent year-on-year increase and 10.6 percent growth in real terms, which is about three times that of the “robustly-growing” U.S.

Amid such circumstances, those who claimed that the Chinese economy is experiencing a hard landing are being absurd.

Though China is facing slowing growth and weakening of over-capacity industries, its emerging industries are flourishing.

In 2015, the added value of industrial enterprises with annual revenue of 20 million yuan or more in China grew 6.1 percent year-on-year at comparable prices, while high-tech industries increased by 10.2 percent, 4.1 percent higher than that of large-scale industries.

Annual investment in the iron and steel industries dropped by 11 percent last year, with a 14 percent reduction in investment in the coal industry. Meanwhile, computers, electronics and telecommunications manufacturing, as well as the pharmaceutical industry, received 13.3 percent and nearly 12 percent more capital respectively.

The second fallacy claimed by Soros - that China’s slowdown will worsen global deflationary pressures - is also groundless.

In an interview with Bloomberg, Soros claimed that China’s slowdown is combining with lower oil prices and competitive currency devaluations to increase the risk of deflation around the world.

However, such fictitious opinions, which also emerged years ago, don’t hold water.

As the largest importer of energy and raw materials in the world, China is the recipient of both the inflation and deflation, not the creator.

Moreover, thanks to its rising labor costs, China has alleviated the pressure from global deflation.

Against a backdrop of deflation around the world, China’s producer price index and purchase price index have been dropping for several years, and the latter is lower than the producer price index, further indicating that China shouldered the external deflationary pressure.

The reason behind this is the nearly full employment in China’s labor market and rise in wages, which to some extent have offset the influence brought by price drops in energy and raw materials.

It also contributed to a price growth of consumer goods, which has been higher than growth in service prices for three consecutive years.

What’s more important is that deflation and inflation are essentially monetary phenomena, whether or not the inflation of a few years ago or current deflation can all be attributed to the eased and tightened monetary policies of the U.S. Federal Reserve.

Even though China’s central bank is gaining more influence in the global financial market, it is yet to compete with the Fed.

So at what is the so-called wake-up call targeted? Not China, but other emerging economies.

Although he claimed that China is headed for a hard landing, Soros also believed China is capable of solving the issue, since China has more resources and more flexibility in implementing policy options.

Therefore, other emerging markets, instead of China, will be affected most from Soros’ shorting and speculative attack on currencies.

Amid such a backdrop, emerging economies should deepen monetary cooperation with China to eliminate threats from Soros and other global speculators and crush all of this nonsense with their own vigorous economic development.

This article is edited and translated from 中国经济硬着陆?胡说 Source: People's Daily Overseas Edition

The author is a researcher at the research institute of China’s Ministry of Commerce.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Hongyu,Wu Chengliang)

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