China

Important questions about China’s future

Tuesday, September 8th, 2020

China has advanced to an increasingly important player on world (financial) markets. This special position increases China’s responsibility to avoid future economic and financial imbalances – partly because of the well-known cross-border contagion risks.

Some big questions in a financial deregulation context are for China in the next five to ten years (also part of ongoing discussions with students at Linnaeus University):

¤  Generally: Will China’s GDP growth be big enough for being able to introduce initially hurting reforms?  How will China handle the restructuring of its state-owned companies and the shift to competitive modern technology and products? We know from the Swedish financial deregulation that such a new policy stance should happen from a position of strength.

¤  Can China achieve surpluses in the current account balance in the longer run – also when regarding the possibility of renewed harsh American protectionism?

¤  How rapidly will China deregulate its capital account – and open for speculative capital flows?

¤  Can China handle its global power and strong international influence in an appropriate way and develop into an appreciated global partner politically, financially and economically? What will happen in Hong Kong?

¤  Will China’s version of the market economy be reversed at some point – or rather be improved in a longer perspective?

¤  How will China come out of the post covid-19 challenges in the medium run and what about the impact on unemployment also from this factor?

Altogether, there is a lot of room for further optimization of Chinese economic policy and of financial markets. Such improvements would be good for China’s own economic growth and stability but also in a global perspective – particularly when applying a long-term view.

Why not trying to reflect on these issues a little bit on your own?

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page

China abandons ambition to be acknowledged as market economy

Tuesday, July 14th, 2020

International recognition has been given high priority in the past few decades by China’s political leaders. Being welcomed by the WTO as a new member in 2001 was celebrated as a brilliant success in Beijing and the whole country. I could see it with my own eyes during a simultaneous visit in Beijing. An enormous new potential was opened for Chinese exporters but also for globally oriented foreign companies in this largely promising country. Without doubt, one may conclude that China turned to be the winner of globalization in the past twenty years, meaning also quite some opening up during this time.

But what about this spirit of opening up in the future? First signals of giving domestic objectives even more priority are obvious. Interventions in Hong Kong, increasing surveillance, declining transparency (covid-19), less calming diplomacy vis-à-vis the United States and relatively easily accepted abolition of the market-economy objective point indeed at stronger prioritization of domestic issues and (somewhat) lesser international harmony considerations. However, it should be kept in mind that China still maintains a neutral and even collaborative voice in its contacts with the EU.

No chance to be recognized as a market economy

Five years ago, there was a lot of pressure on the EU to finally give China the status of a market economy. Such an improved classification would have meant for China a milder treatment by the WTO with dumping conflicts. However, the EU never wanted to give such a mandate to the WTO. China has now canceled these ambitions and has therefore to accept possible anti-dumping accusations also in the future. Obviously, this formerly important international goal had become less relevant after many years of waiting and not really worth-while to go on fighting for.

Also when analyzing more deeply the whole question, it was impossible to find neutral arguments for a Chinese upgrading to market economy (see also my comments on this from 2016, https://blogg.lnu.se/china-research/?p=2164). China still has by far too much government in the economy and by far too weak institutions. No doubt about this!

However, all this has not necessarily to lead to negative consequences for global trade. I do not rule out completely that China will try to keep down future dumping charges as much as possible. Time will tell us.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page

Unemployment – the most unusable indicator in China?

Thursday, June 25th, 2020

————————————————-

Arbetslösheten – Kinas minst användbara konjunkturindikator?

Brief summary / sammanfattning

Kvaliteten i Kinas ekonomiska statistik har aldrig haft gott anseende bland flertalet utländska Kinaforskare. Tillämpningen av vettiga tidsserier har alltid varit synnerligen begränsad. Den officiellt redovisade arbetslöshetsstatistiken framstår som den kanske minst användbara konjunkturindikatorn för internationella bedömare. Arbetslöshetsstatistiken är helt enkelt inte tillräckligt omfattande.

————————————————–

After having dealt with Chinese official statistics during 30 years, I still have the concrete impression that the monthly, quarterly and annually published economic numbers never could give me a feeling of applicable and comfortable accuracy (e.g. in: Finance India. The Quarterly Journal of Indian Institute of Finance, ISSN 0970-3772, Vol. 25, no 4, s. 1189-1207). Too many statistical inconsistencies could be found more or less regularly over the years. Other (academic) economists came to the same conclusion.

Referring to the corona virus, I pointed some months ago at the new opportunity for the official China to create better transparency – and by a new policy of improved openness to achieve an upgrading of its international reputation (see my article here on chinaresearch.se from April 14, 2020). And I strongly argued for the view that China itself could have benefited from such a policy change.

Unfortunately, China did not want to go for such a new direction. This also means that unemployment numbers will continue to be the same conundrum as they have been in the past decades.

Unemployment statistics covers only a limited part of the economy

Two different measurements of unemployment rates can quite easily be found in official statistics, one for 31 metropolitan cities and one for total urban unemployment http://data.stats.gov.cn/english/easyquery.htm?cn=A01. But also in this blog’s limited context show up a number of questions without good possible answers, quoting here some of them.

¤ Rural unemployment is not included in the official – survey-based – unemployment numbers. Is this a curable major shortcoming?

¤ There is no good estimate about migrant workers working occasionally in the cities, in good times according to the authorities up to 300 million people – and now may be half of it. One has to wonder where these newly unemployed people have gone in reality and in statistics?

¤ Also officially confirmed, migrant workers accounted last year for roughly one third of the Chinese labor force. Based on this number, it puzzles quite a lot that total urban unemployment in the 31 major cities merely rose from 5.3 % in July 2019 to 5.9 % in April 2020.

No clear answers to be expected

Increasing unemployment may be the most crucial issue for China’s leadership, both politically and socially (which is interconnected). For this reason, promising opening up in unemployment communication will not take room in the foreseeable future – unless the economy unexpectedly will face an explosive and sustainably strong recovery.

Who believes in such a development?

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

Back to Start Page