State researcher: China’s economy haunted by the prospect of a 'downward spiral'
Li Yang, head of the National Institution for Finance and Development and former deputy head of the Academy of Social Sciences, acknowledges that “GDP (growth) is slowing, investment (growth) is slowing, export (growth) is slowing and consumption (growth) is slowing". The private sector is also suffering. Wages are likely to drop whilst bankruptcies and layoffs are likely to increase. The economy is slowing in Guangdong, Jiangsu, Shandong, and Zhejiang, provinces that led the country’s development.
Beijing (AsiaNews/Caixin) – China’s economic expansion may be entering a long-term “downward spiral” as all three engines of growth — investment, exports and consumption — slow down, said Li Yang, head of the National Institution for Finance and Development (NIFD), in a speech at the Chinese Institutional Investors Summit on Saturday in Beijing.
Li, who is a former deputy head of the Chinese Academy of Social Sciences, expressed the concerns of China’s leaders as they grapple with the impact of the trade war with the United States.
“GDP (growth) is slowing, investment (growth) is slowing, export (growth) is slowing and consumption (growth) is slowing” and the growth rates are slowing at the same pace or faster than GDP growth, he explained. This affects the private sector, whose situation is "quite serious".
President Xi Jinping held a seminar with private entrepreneurs last week in Beijing to assure them of the government’s and the Communist Party’s support for the private sector as entrepreneurs struggle with a cooling economy and an unfavourable financing situation.
Li’s speech touched on several economic challenges facing China, including job creation, noting that “As the economy cools, it’s possible new job creation will soften, companies who are in difficulty will cut wages, the growth rate of salaries will decline, and we will see an absolute fall in pay. [. . .] We may even see people lose their jobs. This is the impact of Sino-US trade friction passing through into the labor market.”
Li also raised the alarm about the economic slowdown in Guangdong, Jiangsu, Shandong and Zhejiang provinces in the first half of 2018. These are China’s most developed regions, and they showed a slide in growth that was higher than the national average.
Li also called on the government to take a market-oriented approach to the economy, abandoning the policy of massive subsidies, to encourage innovation and to expand reforms.
For Li, “There are important reforms such as property rights, especially the issue of non-state ownership, intellectual property rights,” as well as accelerating fiscal reform.
Speaking about trade tensions between China and the United States, Li accused the US of "economic aggression", slamming Washington for its unwillingness to accept that the relationship between China and the United States is now based on great power relations and that Beijing no longer acknowledges the US as the number one superpower in the world.