On July 9, 2011, Tsinghua University Center forChinain the World Economy (CCWE) held its eighth forum, entitled, “What Does a Slowdown Mean?” The forum focused on the numerous challenges that face both the world and Chinese economies and the influence that these factors will have onChina. Major issues addressed included the Euro zone debt crisis; the national debt situation involving theU.S.economy; the slowdown of the GDP growth rate inChina; the structural adjustment of the domestic economy; andChina’s struggle with inflation. Professor David Daokui Li, Director of CCWE and Member of the State Monetary Policy Committee, served as the forum’s moderator.
Forum panelists included: CHEN Dongqi, Deputy Director, Research Institute of Macroeconomics, National Development and Reform Committee; WANG Jian, Secretary-General of the China Macroeconomics Society; YUAN Gangming, Senior Research Fellow, CCWE and Chinese Academy of Social Sciences; Francis LEI, Director, Department of Economics, HKUST; CHEN Xingdong, Deputy Managing Director and Chief Economic Manger, BNP Paribas Peregrine; BA Shusong, Deputy Director of Financial Institute, Development Research Center of the State; David Dollar, Economic and Financial Emissary to China, U.S. Department of the Treasury; Louis Kuijs, Senior Economist, World Bank China Office; and Yann Marin, Financial Counselor of the Economic Department, French Embassy.
The forum began with a panel discussion among the three foreign participants, during which they addressed key economic issues both inChinaand around the world. Mr. Dollar began by addressing the current situation in theU.S.economy, which had just received disappointing data in terms of economic growth and increasing unemployment, an unusual development at this stage of a recovery. Mr. Dollar also explained why it is necessary for the United State Congress to increase the debt ceiling in order to avoid defaulting on its obligations and expressed that he is cautiously optimistic about a resolution being reached by the August 2nd deadline. Mr. Kuijs said that the performance of the world economy is very important to the Chinese economy and that he is not overly concerned with a slowdown in the Chinese economy as the growth rate is still very strong and the government is able to make adjustments when needed. Mr. Marin addressed the European economy, saying that he believes much of the negative speculation on the Euro is misplaced as the Euro is in better condition than currencies in other developed countries. He pointed out that the total annual debt of countries in the Euro zone is 6% of GDP, which is a lower rate than all other developed countries. He also added thatChinahas been very supportive by buying some treasury bonds from countries that have been experiencing financial difficulties. He believes that this has been a good deal forChinabecause these bonds have higher yields andChinais benefiting from the risk yield.
From there, the forum shifted to the domestic section, where the participants debated on the slowdown of the Chinese economic growth. In addressing the concern that the government may have overtaken measures to regulate the economy, the majority opinion voiced that reduction of GDP growth is inevitable and reasonable. In the long run, the structural adjustment of the domestic economy, which is a major part of the “Twelfth Five-Year Plan,” is important forChina, and the change of the economic growth model will surely slow down the economic growth. In the short run, the immediate causes of the reduction of GDP growth are the dramatic reduction in financing and the reduction of foreign demand. But the declining of the GDP growth has its bottom line – which should be no less than 9% in 2011 – for several reasons. First, sinceChina's urbanization and modernization are far from finished, and the promotion ofChina's urbanization and modernization will continue, the impressive economic growth should not be a problem in the future. Second, the large construction of public housing and water conservancy facilities in the second half of the year will also promote the growth of the economy. Third, if the CPI will decline in the third quarter as the participants forecast, the appropriate adjustment of the monetary and fiscal policy will be implemented in the second half of the year. The panelists believed that continuous reform is most important, as it is the ultimate answer for continuous future growth in China.
The forum also featured the release of the most recent economic report produced jointly by CCWE and HKUST Center for Economic Development. The report forecasts the economy for 2011 and 2012, covering GDP, CPI, M2 supply, import and export and fixed asset investment. The report predicts thatChinawill experience a GDP growth rate of 9.5% and 9.3% in 2011 and 2012, respectively, a modest slowdown from the 10% growth experienced in 2010. CPI will decline from the high level in the first half of the year to 4.8% in 2011 and 2.7% in 2012. M2 will grow by 15.5% and 16.2%, slower than 2010, which saw a growth rate of nearly 20%. The growth rate of exports will decrease to 19.0% in 2011 and then to 15.6% in 2012, while the growth rate of imports will remain relatively steady at 26.3% and then 24.9%. In 2011 and 2012, the trade surplus will decrease sharply. Fixed asset investment will see its growth rate remain relatively high at 25.3% and 25.6%, respectively.
As a timely and effective platform, Tsinghua University will continue to invite extraordinary policy-makers, experts and business leaders -- domestic and international -- to address current and long-term Chinese domestic issues in relation to the international political and economic environment. The objectives of the forum are to brainstorm/inform and provide a solid basis for policy debate and recommendations.
