{"id":2865,"date":"2019-10-16T10:14:13","date_gmt":"2019-10-16T09:14:13","guid":{"rendered":"http:\/\/blogg.lnu.se\/china-research\/?p=2865"},"modified":"2020-01-20T08:56:34","modified_gmt":"2020-01-20T07:56:34","slug":"pressure-on-china-and-india-to-revive-growth","status":"publish","type":"post","link":"https:\/\/blogg.lnu.se\/china-research\/?p=2865","title":{"rendered":"\u201cPressure on China and India to revive growth\u201d"},"content":{"rendered":"

Presentation by Hubert Fromlet, affiliate (affilierad) professor at Linnaeus University (Linn\u00e9universitet), Sweden, on October 16, 2019, at its annual
\n\u201cBaltic Sea Region<\/strong> \/Emerging Market (China) Day<\/strong>\u201c in Kalmar\/ Sweden ————————————————————————————————–<\/p>\n

Brief summary in Swedish <\/strong><\/p>\n

B\u00e5de Kina och Indien drabbas f\u00f6r n\u00e4rvarande av d\u00e4mpad BNP-tillv\u00e4xt. Tillv\u00e4xtf\u00f6rsvagningen \u00e4r mestadels hemmagjord. Kina p\u00e5verkas dock mer \u00e4n Indien av USA:s protektionism. S\u00e5v\u00e4l Kina som Indien \u00e4r piskade att undvika en ytterligare tillv\u00e4xtd\u00e4mpning eller att snarast m\u00f6jligt komma p\u00e5 en (n\u00e5got) snabbare eller \u00e5tminstone stabilare tillv\u00e4xtbana igen.<\/p>\n

I Kina<\/strong> handlar redan nu all ekonomisk planering bakom kulisserna om att kunna presentera landet i en mycket positiv dager vid Kommunistpartiets 100 \u00e5rs jubileum \u00e5r 2021 – men ocks\u00e5 att redan n\u00e4sta \u00e5r kunna framkalla positiva rubriker vid utv\u00e4rderingen av de cirka 50 ekonomiska reformplanerna som lades fram vid Centralkommitt\u00e9ns Tredje Plenum \u00e5r 2013. Utvecklingen bortom 2021 f\u00f6rblir oklar som resultat av den till jubileums\u00e5ret delvis artificiellt framkallade tillv\u00e4xten.<\/p>\n

F\u00f6r regeringen i Indien<\/strong> g\u00e4ller det inte minst att \u00e5tervinna konsumenternas f\u00f6rtroende. Nationalr\u00e4kenskaperna visar att det \u00e4r framf\u00f6r allt konsumenterna som p\u00e5 sistone blivit mer skeptiska. Indiens st\u00e4ndiga h\u00e4nvisning till att den egna tillv\u00e4xten p\u00e5 senare \u00e5r varit b\u00e4ttre \u00e4n Kinas h\u00e5ller inte riktigt eftersom Indiens upph\u00e4mtningsprocess kommit ig\u00e5ng tydligt senare \u00e4n Kinas. Indiens l\u00e5ngsamma reformtempo b\u00f6r h\u00f6jas i den m\u00e5n det \u00e4r m\u00f6jligt.<\/p>\n

———————————————————————————————————–<\/p>\n

Why GDP growth is so important to China these days \u2026<\/strong><\/p>\n

Despite regularly returning general criticism, the Gross Domestic Product (GDP) is still treated by almost all analysts as the most important and most frequently used macroeconomic indicator of a country. Critics, however, mostly want conditions like the environment, national health, wealth etc. to be included in annual national accounting (GDP) as well. Certain governments work already on widened definitions of economic growth but rather in additional terms than on substitutional conditions. These efforts are – in my view – a good idea but certainly difficult to develop and measure in practice. Attempts should be made all the same – like intended in Sweden (though I have so far not heard anything about the progress in this specific respect).<\/p>\n

Good numerical GDP growth means traditionally a lot to China and its political leaders. Progress can be shown to the public in a relatively simple and understandable way. The lagging accuracy of official GDP statistics is not really an issue for discussion in the second largest economy (second in dollar terms – but in so-called PPP terms, total Chinese GDP is already the largest in the world).<\/p>\n

Outside China, however, many economists have recognized the qualitative statistical shortcomings and inconsistencies of China\u2019s GDP calculations – however, without having the tools to explain these shortcomings in a more accurate way. However, it is certainly not normal that Chinese GDP-growth rates are more or less even during at least several quarters and very predictable from quarter to quarter and from year to year. This happens to my knowledge nowhere else in the world but in China.<\/p>\n

The extremely important anniversary year of 2021<\/strong><\/p>\n

For this reason, I feel very sure that the evaluation and anniversary years of 2020 and 2021 will be presented as (very) positive years for the Chinese economy. 2021 will be a key year for the Communist Party, 100 years after its foundation. It is certainly not desirable for China\u2019s political leadership to announce and\/or admit a notable downsizing of GDP growth in 2021. GDP growth will therefore be particularly stimulated by monetary policy, certain (environmental) investments and financial support to state-owned companies – indeed as much as possible. Any GDP growth below 6 percent in 2019, 2020 and 2021 would be a major surprise – and probably mean that the development in reality has been worse than this. And besides, in Chinese mythology six is certainly a more lucky number than five.<\/p>\n

It could be added when trying to figure out what is really happening in China\u2019s economy, I prefer using indications or indicators like official statements by President Xi Jinping and Prime Minister Li Keqiang and reading their comments between the lines, particularly when these top leaders themselves are pointing at a problem . I also look carefully at changes of the banks\u2019 cash requirements at the People\u2019s Bank of China and even more when they are loosened. This means normally an official easening of monetary and credit policy, i.e. an attempt to stimulate the economy and growth. Furthermore, the development of the Producer Price Index (PPI) seems to be another good short-term<\/em> indicator because of its obvious correlation with GDP. Not to forget statistics on transports!<\/p>\n

Sure, there are also many long-term<\/em> challenges for China – such as private and (local) government indebtedness, the avoidance of a late bursting of the real estate bubble, the creation of new competitive industries with advanced technology, sustained social stability, clear improvements of the environment, dealing with demography and the necessary processes of improving institutions, financial markets included. And what about attempts to improve certain international political relations?<\/p>\n

Without doubt, we can recognize China as a superpower that has to face many difficult challenges in the forthcoming decade and even beyond. But there is also a China with specified high ambitions and strong strategic objectives, well looking into the future and working actively for good or at least satisfactory GDP growth in the medium and longer run.<\/p>\n

The outcome of this balancing act will remain uncertain for quite some time. But we know that the legitimacy of Chinese political leadership continues to be linked to economic progress, i.e. GDP growth.<\/p>\n

\u2026 and India ?<\/strong><\/p>\n

More recently, GDP growth has been weakening in India as well, first due to decelerating activities in investment and now very obviously by dampened demand from consumers. All this his is certainly not a good message to Prime Minister Narendra Modi and his government. There is pressure on government politicians to work harder for renewed strong economic growth.<\/p>\n

Currently, India\u2019s GDP growth is still roughly in line with China\u2019s – but after some time of higher Indian GDP growth than Chinese. 5 percent in y-o-y GDP growth during Q2 in 2019 means the weakest Indian increase since Q1 in 2013. The exact answer to the most probable numerical GDP differential between both countries depends highly on China\u2019s assumed accuracy in national accounting (which we do not know enough about).<\/p>\n

Consumers need to become more confident – both in the short and the long run<\/strong><\/p>\n

The currently declining speed of economic growth can be mainly related to skeptical consumers. Consumers\u2019 confidence has been coming down – and, logically, also GDP growth. Future sustainable GDP-trend forecasts at around 8 percent – as often published about two years ago – can certainly not be taken for granted.<\/p>\n

Of course, also India has a lot of burdening medium- and long-term challenges. Among them, one can find high governmental fiscal deficits, slowly moving legislation processes, poor infrastructure and environment, lagging human capital formation, political relations to China etc.<\/p>\n

However, despite these structural shortcomings: India has two important competitive advantages compared to China – being a democracy and an average population that is ten years younger than China\u2019s; together, China and India count quite equally distributed for more than one third of the global population.<\/p>\n

But India can only benefit from this latter advantage if it will be able to give the younger Indians clearly improved conditions for their education. For this conclusion, we have a lot of scientific confirmation.<\/p>\n

\"\"<\/p>\n

Hubert Fromlet<\/em><\/strong>
\n<\/em>Affiliate Professor at the School of Business and Economics, Linnaeus University
\nEditorial board<\/a><\/p>\n

 <\/p>\n

Back to Start Page<\/a>
\n<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Presentation by Hubert Fromlet, affiliate (affilierad) professor at Linnaeus University (Linn\u00e9universitet), Sweden, on October 16, 2019, at its annual \u201cBaltic Sea Region \/Emerging Market (China) Day\u201c in Kalmar\/ Sweden ————————————————————————————————– Brief summary in Swedish B\u00e5de Kina och Indien drabbas f\u00f6r n\u00e4rvarande av d\u00e4mpad BNP-tillv\u00e4xt. Tillv\u00e4xtf\u00f6rsvagningen \u00e4r mestadels hemmagjord. Kina p\u00e5verkas dock mer \u00e4n Indien av […]<\/p>\n","protected":false},"author":174,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13398,13622],"tags":[],"class_list":["post-2865","post","type-post","status-publish","format-standard","hentry","category-china-2","category-india"],"acf":[],"yoast_head":"\r\n\u201cPressure on China and India to revive growth\u201d - China Research<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/blogg.lnu.se\/china-research\/?p=2865\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"\u201cPressure on China and India to revive growth\u201d - China Research\" \/>\r\n<meta property=\"og:description\" content=\"Presentation by Hubert Fromlet, affiliate (affilierad) professor at Linnaeus University (Linn\u00e9universitet), Sweden, on October 16, 2019, at its annual \u201cBaltic Sea Region \/Emerging Market (China) Day\u201c in Kalmar\/ Sweden ————————————————————————————————– Brief summary in Swedish B\u00e5de Kina och Indien drabbas f\u00f6r n\u00e4rvarande av d\u00e4mpad BNP-tillv\u00e4xt. 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