No. 12 | The Twelfth Tsinghua University China and the World Economic Forum
On July 1, 2012, Tsinghua University Center for China in the World Economy (CCWE) held the 12th Tsinghua University China and the World Economic Forum. The forum focused on the conditions of and outlooks for both the Chinese and world economies and the many elements and issues that will have an influence on both China and the world. Major issues addressed included the slowdown of China’s economy; structural reform of the Chinese economy; the domestic real estate and financial industries; the future of the euro zone; and the political and economic circumstances related to the United States’ economic recovery. Professor David Daokui Li, Director of CCWE, served as the forum’s moderator.
Forum panelists included: REN Zhiqiang, Former President, Huayuan Real Estate Group; CAO Yuanzheng, Chief Economist, Bank of China; Francis LUI, Director, Department of Economics, HKUST; HE Fan, Deputy Director, Institute of World Economics & Politics, Chinese Academy of Social Sciences; CHEN Dongqi, Research Institute of Macroeconomics, National Development and Reform Committee; WU Xiaoqiu, Director of the Institute for Finance and Securities Studies, Renmin University; YAO Jingyuan, Chief Economist and Spokesman, National Bureau of Statistics of China; Alberto Forchielli, Partner, Mandarin Capital Partners; and Aaron Back, Deputy China Bureau Chief, Wall Street Journal.
The main discussion focused on the slowdown in China’s economic growth. Overall, the panelists agreed that while the GDP growth rate will fall sharply in 2012, it will not dip below 7.5%. It was expressed that China should become accustomed to this type of single-digit growth in the future, and that even 7.5% is still a high growth rate. As for how to deal with the economy in the near-term, it was suggested that a package of fiscal and monetary policies should be implemented, such as tax cuts, strengthening the investment of infrastructure, encouraging consumption and supporting investment in innovation. It was asserted that what currently ails China's economy is that the transformation of the economic growth pattern is too slow and the frenzied investment and massive exports can no longer support the rapid growth of China’s economy. In terms of how to address the future, the focus of policies should shift from steady economic growth to the adjustment of the economic structure. The key to the adjustment is to establish a path of balanced and sustainable development, wherein the key is the quality of growth, not the quantity.
In terms of other concerns within the domestic economy, Wu Xiaoqiu said that in regard to the equity market, the fundamentals are good, but confidence is lacking. Once the confidence returns, stockholders should enjoy strong long-term returns. In terms of real estate, Ren Zhiqiang stated that real estate is always the pillar industry both for developed and developing economies, and that the driving force of real estate should be derived from the market, not the government. At the same time, he believes that the government has intervened too much in the real estate industry. Professor Francis Lui added that the experience of Hong Kong has taught us that it is better to have less government regulation. China's economic growth should be more stable and stronger when the market plays more of a dominant role.
Major international issues were also addressed, particularly the economic and political situations in the United States and Europe. In regard to the United States, Aaron Back explained that the U.S. government might be on the ledge of a “fiscal cliff.” With the Bush tax cuts expiring at the start of 2013, automatic spending cuts will take effect, which would send the U.S. economy into an instant recession. He stated that he does not think this will happen, as Republicans do not want taxes and Democrats do not want spending cuts. He also pointed out that America’s major long-term problems are Medicare and Social Security and that they need to be dealt with. In regard to the upcoming presidential election, President Obama is currently slightly ahead of Mitt Romney in the polls, and Back believes that while people may see some anti-China rhetoric and politics prior to the election, it will not get out of control, as both sides understand it is not in anyone’s best interests to have a trade war. In terms of Europe, it was Alberto Forchielli’s view that the continent is going to go through one more year of difficulties and will reach the brink of disaster several times. In order to fix its problems, Europe needs to be on the brink, because things will get done only when the leaders are under pressure to do something. However, Forchielli thinks the situation will be ultimately resolved, as the results would be absolutely disastrous for everyone if there is a breakup of the euro zone. He also stated that Europe is a great destination for Chinese investment, as Europe greatly desires Chinese investment, and that Chinese investment on the continent has done very well. In addition, he urged Chinese companies to move quickly to invest in Europe before the possible implementation of protectionism.
The forum also featured the release of the most recent economic report produced jointly by the CCWE and the HKUST Center for Economic Development. Professor Li provided an overview of the report and explained that based on the overall analysis, China’s policy adjustments should not mirror the four trillion RMB stimulus package of 2008 and 2009. Steady economic growth should be linked to promoting reform, improving the livelihood of people and adjusting the structure of the economy. Other contents of the report include forecasts for the economy for 2012, covering GDP, CPI, M2 supply, import and export and fixed asset investment. The report predicts that China will experience a GDP growth rate of 8.4% in 2012, a modest slowdown from the 9.2% growth in 2011. CPI will decline to 2.9% in 2012, and there are also some uncertainties. M2 will grow by 13.9% in 2012. The growth rate of exports will decrease to 12.9% in 2012, which is slightly more optimistic than early forecasts. The growth rate of imports will also decrease to 16.8% from 24.9% in 2011. In 2012, the trade surplus will decrease to 1.28% of GDP, while fixed asset investment will see its growth rate remain relatively high at 22.6%.
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 as they relate to the global political and economic environment. The objectives of the forum are to brainstorm, inform and provide a solid basis for policy debate and recommendations.
