Many analysts have lauded the resilience of the US economy. At the same time, on the other hand, many analysts warned that China’s economy is very precarious. The “China collapse” story has been repeatedly told by different people. One of the best-known pessimists on China is Gordon Chang, who published a book titled The Coming Collapse of China in 2001 and predicted that the Chinese economy would crash by 2011.
Today, China is indeed facing some headwinds, ranging from problems in the housing market to weak exports and geopolitical tensions with the United States. Many observers are wondering if China will repeat Japan’s decades-long economic stagnation since the early 1990s. However, I can tell readers that China’s resilience must not be underestimated. I daresay that China’s resilience probably tops the world.
China’s last full-year negative economic growth was registered in 1976, and that is almost half a century ago. In comparison, the US has had five years of negative growth since then. Market observers are surprised by the strong job market in the US, which has seen solid employment growth since 2020. But that has to do with very strong asset markets, which were bolstered by its aggressive quantitative-easing policy.
Unlike the US and Japan, China did not have a quantitative-easing policy. Still, China somehow managed to grow even in 2020, a year when the US economy contracted 2.8 percent because of the COVID-19 pandemic. When the world was hit by the global financial tsunami in the aftermath of the fall of Lehman Brothers in 2008, China grew at an astonishing 9.4 percent. When virtually all countries in the region suffered from the Asian Financial Crisis, China’s growth rate was 7.85 percent. China has endured each challenge unscathed.
Many observers are disappointed by the poor performance of China’s stock markets. Even Hong Kong’s stock market has done very poorly compared to those of other economies. The sad thing is that even some veteran analysts and investors do not realize that these poor results are at least in part a result of the US’ all-out effort to contain China’s rise. The US invented the “forced labor” story for almost every product that is produced in the Xinjiang Uygur autonomous region. This, along with various sanctions that are arbitrarily imposed on Chinese companies, is holding up the collaborative work of multinational corporations with China. High-end Volkswagen Group vehicles have been held up at US ports after they were alleged to contain a part that may breach US laws against “forced labor”. Volkswagen has replaced a part allegedly built using “forced labor” and plans to complete deliveries of impacted vehicles by the end of March.
Many observers are wondering if China will repeat Japan’s decades-long economic stagnation since the early 1990s. However, I can tell readers that China’s resilience must not be underestimated. I daresay that China’s resilience probably tops the world
US sanctions are not just a fixed list. The list has kept growing longer. Investors are left to wonder which is next. No wonder many are scared away from buying Chinese mainland and Hong Kong stocks. Several major funds and especially pension funds no longer invest in mainland and Hong Kong stocks. As a result of all this, The Financial Times reported that, “Nearly nine-tenths of the foreign money that flowed into China’s stock market in 2023 has already left.”
Given that China is under siege, its 5.2 percent growth record is already very impressive. Some commentators suspect that the actual growth is probably lower. But, given that the country’s electric power consumption rose 6.7 percent, from 8,640 terawatt-hours to 9,220 terawatt-hours while its fiscal revenue increased 6.4 percent in 2023, the 5.2 percent GDP growth figure appears to be quite credible.
China’s resilience must not be underestimated. There are many reasons. The most important reason is strong solidarity among the Chinese people and a strong leadership that is prepared to correct itself incessantly, sees the big picture and knows the country’s priorities, and keeps risks at bay. This is not fortuitous but is firmly based on Chinese culture, which has for ages touted the virtues of humility, serving the country, personal development, and lifelong learning. Although there is no party rotation in China, there is leadership rotation, which has been taking place peacefully for many decades.
It is truly remarkable to see the extent China has progressed on so many fronts. China announced it would engage in economic reform and opening-up in 1978. Since then it has made the renminbi increasingly convertible. Its laws on intellectual property rights protection have made huge strides. It introduced the Property Law of China in 2007, which affirmed the protection of private property. In 2008, it introduced the first patent law, and in 2021, a major revamping of the intellectual property law attracted applause from practitioners in the field.
When Massachusetts Institute of Technology Professor Huang Yasheng in 2013 criticized venture capitalist Eric Li for defending “a political system built on opacity”, he appeared to be unaware of the fact that China had already launched an Open Government Information (OGI) policy in 2007. Zhang Zhibin, a public administration scholar from Flinders University in Australia, in a recent in-depth review on the historical development of OGI in China, published just late last year, concluded that “the OGI initiative represents China’s recent efforts to reinvent its governance model, which is indeed different from those in the West, yet yielding similar and even more far-reaching governance outcomes”.
In many ways, today’s China is like Huawei, which was the target of sanctions and abuses by the West led by the US. It is amazing to see how Huawei still managed to survive and bounce back. If there is a will, there is a way.
The author is director of the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.
The views do not necessarily reflect those of China Daily.
