Every quarter, every month, and every week, there are journalistic pieces, in the world and in China, saying the Chinese economy may be in — or on the verge of — big trouble. Other pieces say not quite, or not yet.
But things are already different from the wobbling start of the year. Now that the government released its report about the economy’s performance in the third quarter on Oct 19, it can be said that China has put out a more encouraging performance in 2016 than 2015.
Not in terms of GDP growth, however. The country’s annualized GDP growth was 6.9 percent in 2015, and will probably be around 6.5 percent this year, based on the growth data of the first three quarters (6.7 percent on average).
Of course, people can still say there are many difficulties — especially that the country can never again dash forward at a speed of 10 percent. Slower growth than the first decade of the 2000s is a given, not a surprise, and part of what officials call the “new normal”.
Nonetheless, the economy has shown, much more clearly than last year, what it can do to sustain a minimum level of stability in the process of its unprecedented transition.
It shows to the world how it can keep growing when it is no longer driven by labor-intensive manufacturing and massive exports, by indiscriminate financial spending, and by ever-increasing use of traditional energy and discharge of pollution.
In other words, what people can see in China in 2016 is its actual development scenario, which is far more important than any strategy on paper or policy in a government news release.
Now, let us look at the key components of this scenario:
Growth driver one: Real estate-related development led mostly by coastal cities, especially the so-called city groups of the Yangtze River Delta, the Pearl River Delta, and the Beijing-Tianjin-Hebei belt.
There have been complaints that skyrocketing prices in Beijing, Shanghai and Shenzhen are acting as a deterrent to young professionals and a threat to new business ventures. But their satellite towns and nearby small cities are increasingly benefiting from the regional resources and can become the large cities’ not-so-expensive service centers.
Cheaper housing projects and better public facilities can help those small cities get the human resources they need and develop local productivity in due course.
According to a State Council document issued recently, China will help up to 13 million formerly rural people settle down in the cites each year from 2016 to 2020, to provide urban labor and generate additional consumer demand.
So, even though there are heavy restrictions in some large cities, people who are chasing better opportunities will still swarm to the eastern coast. This demographic trend will remain despite the changing residential and housing-market terms of individual cities.
Growth driver two: Government investment will be more concentrated in the hands of the central authorities. The most likely projects to receive capital injection from the central government are those of energy development and high-speed railways in the still underdeveloped hinterland and western frontier regions.
Growth driver three: Cities will try to develop themselves after all. As large cities tend to be more heavily indebted from their old development attempts and face stricter regulatory terms for re-finance, the only viable option for them, according to the central government, is to engage with private investors through mixed-ownership programs. Whether any smaller cities can act more quickly than them is still to be seen.
Growth driver four: Personal investment and credit. People tend to invest and borrow a lot more in large cities — in their housing units, in the securities market, and in their own or their friends’ business ventures.
Soon enough, China will become the largest personal financial market in the world, with a variety of novel instruments. But figuring out how to ensure the healthy development of this market will be a new challenge that the nation has not yet been prepared for.
