Has China's Economy Reached a Turning Point?

来源: 《CHINA FOREX》2017年第3期 作者:Ba Shusong Zhu Hong

China's economic data has been moderately positive since the beginning of this year. Economic growth has been better than expected while exports and domestic consumption have improved while gains have been made in other areas as well. As a result of this short-term upturn,there has been considerable debate about whether the Chinese economy is entering a "new growth cycle." But from a structural perspective,the economy does not really possess factors that will produce a significant rise in economic growth over the longer term. At the same time,the recovery of the global economy remains weak and anti-globalization sentiment is spreading,creating circumstances that are not favorable to China's exports. China's current economic situation should be seen as something closer to renewed volatility rather than the beginning of a new and more robust economic cycle.

A new cycle requires a reshaping of the demand and supply side of the economic growth picture.  At present,China's financial system and the economy as whole are in the process of shedding inventories. This is not the start of a new cycle.

The economic cycle marks a change in the rhythm of the macroeconomic system. In order to judge when this occurs we need to analyze the factors that affect economic growth. From the experience of domestic and international economic cycles,the start of a new cycle requires low factor prices,low capital costs and new growth conditions. Low factor prices depend mainly on the long-term impact of population growth,improved labor productivity,the promotion of a one-time decline in the cost of production and a relative revaluation of human capital as a result of new technological breakthroughs.

Low capital prices are reflected in the reforms that produce financial deleveraging and extend new financing channels,alongside cuts in interest rates and the bank deposit reserve ratio. It is more noteworthy that the start of a new cycle requires the exploration of new growth points to stimulate demand and form sustainable,long-term economic growth momentum.

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