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Xi steers China on a slower but steadier course

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What is the outlook like for China's economy as we enter a new year?

China's economy in 2017 is expected to have grown at 6.9 per cent, up from the 6.7 per cent of the previous year. This puts China back as the world's best-performing major economy for the year, especially compared with other fast-growing emerging economies such as the Philippines (6.6 per cent), India (6.5 per cent) and Malaysia (5.8 per cent).

For almost three decades, China was the world's stellar growth champion when its economy was growing at double digits. However, no economy can sustain such super-growth forever. As China started to head for lower growth from 2012, it soon ceded its leading growth position to latecomers like India. This led to sensational reports in the international media about China's "big slowdown".

It is now clear that these assessments had totally misinterpreted China's economic slowdown process, just as they had exaggerated the country's potential problems, such as high debt (the so-called Minsky Moment), overproduction and potential property bubble. Accordingly, the international media had also underestimated the Chinese government's ability to manage its economic slowdown through appropriate policy intervention. Many foreign analysts repeatedly predicted a "hard-landing" scenario for China's economy.

China's transition to lower growth has been truly unique. First, unlike the other high-performance East Asian economies of Japan, South Korea, Taiwan and Singapore, China had not only sustained its hyper growth much longer (over three decades) but also ended its high growth not abruptly, but gradually, by maintaining reasonable growth at high levels.

China formally ended double-digit high growth in 2012 at 7.9 per cent, followed by a marginally lower growth rate of 7.8 per cent for 2013, 7.3 per cent for 2014, 6.9 per cent for 2015 and 6.7 per cent for 2016. The whole "slowdown" process of 2012-16 has been remarkably stable, with the growth curve levelling off in an almost horizontal manner.

China had indeed chalked up an average growth rate of 7.3 per cent during this so-called "slowdown" period of 2012-16.

This notion of China's "economic slowdown" has therefore been a misnomer. Any growth rate of above 7 per cent is still regionally and globally a highly respectable performance. China's growth has "slowed down" only in the context of its own historical growth path.


© The Straits Times