China

Europe’s chance in China

April 7, 2017, by Hubert Fromlet, Kalmar

President Trump met most recently his counterpart in China, President Xi Jinping. Regardless what the outcome of these meeting really turns out to be,Trump has not started up his relations with China in a friendly way. That’s certainly how the Chinese feel right now.
One may mention, for example, that Trump has accused China of
– of conducting unfair trade policy,
– of manipulating its currency,
– of having “invented” the global environmental crisis,

Furthermore, China has criticized Trump for his verbal support of Taiwan.

There is no doubt that the EU and a number of EU countries could benefit from these Chinese-American tensions. China indeed would like to enlarge its relations with Europe and European companies.
But China would also like to see a more reforming and harmonizing EU. My impression from visits to China and from talks with the Chinese is without doubt that they consider the EU as an underperforming institution with serious efficiency problems (which certainly is the case to a high extent).

China also dislikes some possible protectionist EU action caused by governmentally subsidized Chinese acquisitions in the EU. It is, however, remarkable that already 2500 Chinese companies can be found in Germany (source CHKD Germany) – mass entrepreneurship not only in China but also to some extent outside China, e.g. in Germany.

The conclusion of these reflections is that internal improvements of the kind described above would be good for the EU itself, Sweden included, but also for relations and business of the EU with the rest of the rest of the world – particularly with the economic giant of China, the largest economy at some point in the (foreseeable) future.
The EU should take this chance now!

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

 

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Modi’s victory – India is awarding its PM

March 16, 2017, by Hubert Fromlet, Kalmar

India’s Prime Minister Narendra Modi and his governing, hindu-nationalist party BJP (Bharatiya Janata Party, BJP) is currently celebrating happy days after the strong victory in the regional elections in the 220-million people state of Uttar Pradesh. This overwhelming result was not really expected after the chaotic currency reform last fall when the government abruptly invalidated almost 90 percent of the circulating bank notes. This measure was taken in order to make people to deposit money visibly at the bank – and, consequently, to combat corruption and black money.

In other words, Modi benefited even from this monetary/institutional reform, expressed by substantial popularity gains. Hopefully, Modi uses his current strong personal ranking for accelerating economic reforms, particularly since his chances of winning the next general elections in 2019 seem to be increasing. So far, Modi’s (and his coalition partners’) reform record is not really convincing. Much more must be done to improve, for example, (youth) unemployment, education, infrastructure, the environment and productivity. At the same time, it is obvious that many Indians still have high expectations that Modi is the man to move their huge country forward.

For 2017 and 2018, a GDP-growth rate around 7 percent seems to be achievable (if major global distortions can be avoided). One should not forget that India’s international trade exposure should be less sensitive to American and global trade distortions than China’s. Indian GDP-growth seems to develop (somewhat) faster than the Chinese in the next few years. Such a comparison is, however, not quite fair since China started its accelerated modernization and restructuring process much earlier than India did.

But India has now an improving chance to catch up!

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

 

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China – (so far) nothing really new from the National People’s Congress

March 6, 2017, by Hubert Fromlet, Kalmar

China holds currently its annual big convention, the National People’s Congress (NPC). The NPC is not a major policy or decision forum but it brings together around 3000 people from all over the country to single out the (economic) state of the country, the outlook for the current year and the strategies behind the plans, particularly the GDP-growth target. Sometimes, also important news may be presented but this mandate is usually more directly in the hands of the most powerful Politburo Standing Committee of the Communist Party. The Prime Minister’s press conference at the end of the NPC week, however, deserves special attention as well. Still, the most interesting event during 2017 will most certainly be the 19th National Congress of the Communist Party of China this coming fall.

On Sunday, March 5, Prime Minister Li Keqiang had his important performance announcing a slight reduction of 2016 year’s GDP-growth target of 6.5-7 % to around 6.5% in 2017 or better if possible (outcome 2016: 6.7%). This is certainly only a minor adjustment and within the limits of accuracy of statistical measurement (which still is not very precise when it comes to Chinese GDP). Anyway, Chinese growth expectations have really come down during the past few years – but China still cares strongly about “employment and the improvement of people’s lives” according to Li Keqiang. This certainly includes the environment. It can be added that Prime Minister Li really did not play down various major risks for the Chinese economy – but positive signals dominated.

There are altogether nine top priorities determining Chinese economic policy during 2017. The details are certainly not new but positively repeating major objectives from the important strategic Third Plenum in 2013. The encouraging conclusion is that reform policy is still on track – and hopefully also after the 19th National Congress of the Communist Party of China (even if certain goal conflicts do not allow for an optimization of all the 60 reform chapters from 2013). Compromises will be needed.

Read more about the top nine priorities of the government for 2017 in an interesting document edited by the State Council (chairman: the Prime Minister) from March 5, 2017:

http://english.gov.cn/premier/news/2017/03/05/content_281475585531944.htm

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

 

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