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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Economy

Economy

China Prioritizes Stability Over Growth

New Year’s resolutions came early to China as a December meeting of the nation’s top leaders produced a new initiative for the country’s stability. According to a reputable source who wishes to remain anonymous, China wants to adapt to a slower growth in order to control financial risks. While China has been experiencing short-term growth by building on its debt, long-term goals for expansion require a stronger economic foundation. Therefore, following this meeting came an order to government officials to prioritize stability in their decision making this year—even at the expense of economic reform.

The meeting included some risk-assessment concerning U.S. President-elect Donald Trump, and how a confrontation over trade might affect the country. Preventive measures against a stagnant economy were also discussed, with innovation as the target growth area.  Officials went on to express alarm over China’s rapid accumulation of total debt as well as the risk of the “Thucydides trap”, the theory by the philosopher of the same name who predicted that a rising power will clash with an established force. Of the former concern, some present at the meeting observed that other nations who accumulate debt over 300 percent of gross domestic product go on to experience crises. Of the latter, it is important to note that five out of seven of China’s top leadership are expected to be replaced at the Communist Party Congress later this year.

According to former China specialist with the U. S. Treasury David Loevinger, this shift initiative is less disruptive than volatility in currency markets would be. “China’s reaching the point where it has to pick its poison” said Loevinger, currently an analyst at TCW Group Inc. in Los Angeles. The legitimacy of the Communist Party also rides on the success of this newly implemented goal, as Loevinger points out that “President Xi Jiniping may realize that unlike his predecessor, Hu Jintao, he can’t kick the can to his successor, even more so if he plans on extending his term”. Former U. S. Treasury attaché to Beijing David Dollar expressed a similar pragmatic outlook on this shift. “Tolerating slower growth is accepting reality,” said Dollar, now a senior fellow at the Brookings Institution in Washington.

Taking these conditions into consideration, the leaders modified goals previously set out by former leaders. The goal endorsed by the last three presidents to double per capita GDP by 2020 has been given a looser timeline, allowing up to three years of leeway. However, even with these modified expectations, analysts remain in doubt as to whether officials will follow through with this resolution for stability.

There is precedence for this doubt; in November 2013, China’s third plenum promised policies that would restructure the economy yet never fully delivered, according to the head of research at Gavekal Dragonomics, Andrew Baston. Andrew Polk, Beijing-based head of China research at Medley Global Advisors, similarly cautions expectations, “There is a big difference between stepping down from an official growth target and abandoning growth-supporting policies altogether.”


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