(Essential questions) Blockbuster丨Jin Keyu: In the eyes of Westerners, why is the Chinese economy always on the verge of collapse?
China News Service, Beijing, May 26. Title: Jin Keyu: In the eyes of Westerners, why is China's economy always on the verge of collapse?
China News Agency reporter Pang Wuji
Jin carved feather.
Photo courtesy of me
The West’s judging mechanism for China’s economy always seems to be in a "failure" state.
Since the 1990s, voices of bad news about China's economy have appeared. Almost every 5-10 years, all kinds of "China collapse theories" will come back, and the voices of "China threat theory" will be mixed during this period.
Some scholars even make a living from this.
A Chinese American scholar published three articles (or books) in 2001, 2011 and 2015, predicting that China's economy will soon collapse.
However, in the past 40 years of reform and opening up, China has not collapsed, but its comprehensive national strength has increased day by day, eliminating absolute poverty. It is the "China collapse theory" that has repeatedly collapsed.
Why does the theory of China collapse and the theory of threat appear in the international community one after another?
Why do Western scholars and media often "inaccurate" the prediction of China's economy?
What will the rise of China bring to the world?
Jin Keyu, a professor at the London School of Economics and Political Science, recently accepted an exclusive interview with China News Agency's "Question of East and West" column, trying to clear the fog.
Data map: Yangtze River Shipping.
Photo by Yin Li
China News Service: Before China released the seventh census data this year, some American and European media began to declare that China is facing a population crisis. This is not the first time that Western society has criticized China. Why does the "Chinese economic collapse theory" appear repeatedly?
Jin Keyu:
I am not worried about China's aging population.
Too much emphasis is now on how many old people, how many young people, and how many labors there are in China.
We should focus on efficiency, because efficiency increases from generation to generation are very fast.
The education level, training and overall environment of the only-child generation enable them to be able to provide for the elderly.
Why does the "China Economic Collapse Theory" appear repeatedly?
First of all, China's growth model is different from the Western market economy model in the textbook.
The outside world has not seen China's growth rate and development model.
Some Westerners believe that if it does not conform to historical conventions, it must be problematic, and even link China's economic model with the former Soviet Union.
These perceptions are wrong.
Second, most of their understanding of China's growth model stays on the surface.
I only know that both the government and the market play a role, and the role of the government is the main one.
Western mainstream media believe that as long as there is government participation, unless it is to provide public facilities, (otherwise) there will definitely be problems, or low efficiency, or a large number of asset mismatches, which will trigger financial system risks.
But they have very little understanding of the more nuanced mechanisms, systems, and economic structure of the Chinese economy, as well as the relationships among the various participants.
In recent years, many foreign experts believe that the biggest source of risks in the international financial system is China.
For example, at the Davos Forum, the problems and risks of China's financial system have been repeatedly mentioned.
Although the debt accumulated by China's rapid development is very high, they did not expect that through policy adjustments, China will slowly greatly resolve financial risks.
The Chinese government has very strong power and resources, and is able to issue a series of policies to control financial risks.
In other Western countries, including the United States, the government does not have that much power.
They are aware of financial risks, but they can really do much less than China.
Data map: Aerial photography of Xiaochantan Wharf in Yangpu Port.
Photo by Luo Yunfei
China News Agency reporter: Where is China's economic system and growth model different from that of Western countries?
Jin Keyu:
In China, the relationship between the government and the market is unique.
The government's resources, strength, and mobilization capabilities are unprecedented in other countries.
According to data released by the State Administration for Market Regulation, 21.79 million new market entities were established in China in 2019.
Western scholars are mostly confused about why so many new companies have appeared in such a short period of time.
In fact, the government has played a very important role, especially local governments.
Local governments are willing to support some relatively efficient private enterprises, which is difficult for economists with mainstream views to understand.
In this Chinese system, politics and economy are closely linked.
The government has a series of evaluation goals, which are to promote development, attract investment, protect the environment, and innovate. They are more willing to select companies with capabilities and potential.
Let's look at the relationship between state-owned enterprises and private enterprises.
The relationship between China's state-owned enterprises and private enterprises is very close. Some state-owned enterprises have directly or indirectly become shareholders of private enterprises.
The data confirms that some of the private companies that are close to state-owned enterprises are the fastest growing and most efficient.
This close network connection between state-owned enterprises and private enterprises is unique to China.
Some people think that if a large amount of state-owned capital is involved, the efficiency will be very low, but in fact it is not.
State-owned enterprises and private enterprises have complementary resources. Private enterprises have good corporate culture and product innovation. State-owned enterprises have advantages in financing. Just like a yin and yang diagram, there are black and white, and the two coexist. This is also incomprehensible in the West.
The relationship between the Chinese government and the market is very complicated, but there is a very clear economic logic and economic relationship.
Most Western scholars have a superficial understanding of this.
Data map: Ningbo Zhoushan Port.
Photo by Shen Yingjun
Reporter from China News Service: What mistakes would China make if we used Western systems and standards to measure China?
Jin Keyu: The
West sees China's economy very inaccurately.
They use their own standards, systems and models to measure China.
They believe that China's savings rate is too high, the investment rate is too high, and the economic structure is biased towards exports and industry.
However, if we observe China from certain macro data only fragments, we cannot understand the growth pattern of China's economy.
Although China's investment rate is higher than that of many other countries, China is urbanizing and requires a lot of investment, including new and old infrastructure.
So what is too high?
The situation in China is different from Japan and the United States.
The savings rate is the same.
From a foreign perspective, a high savings rate means weak consumption, so the savings rate must be lowered to stimulate the economy.
China’s savings rate is indeed high, but it has its advantages.
China's high savings rate has avoided a "trap" that many developing countries have stepped into, that is, the need to borrow large amounts of money from abroad in order to achieve development.
The foreign debt eventually became the fuse of the economic and financial crises in many developing countries.
Another misunderstanding is that China’s savings rate is so high, investment is so high, and economic growth is entirely driven by capital accumulation.
After the investment space shrinks, economic growth will definitely slow down, or even go to a downturn.
In fact, in the past few decades, the efficiency improvement brought about by reforms has been the main driving force of China's economic growth, not investment.
From 1990 to 2007, efficiency improvements contributed more than 50% of China's economic growth. Therefore, it cannot be said that China only relies on investment and savings, nor can it be said that (only) exports are driving economic growth.
Data map: Renminbi and U.S. dollar.
Photo by Chinanews reporter Li Jinlei
China News Service: In recent years, we have heard that the "China collapse theory" has decreased, but the "China threat theory" has increased. Why?
Jin Keyu:
China is really a very powerful country now. It is also the first time in the past 100 years that a developing country with such a population has become the world's second largest economy, and China's culture is very different from that of the West.
China's influence is not only manifested in its huge economy, but China's technology, innovation efficiency, and per capita income of residents have indeed risen step by step. The so-called "threat theory" may stem from the fact that China is really strong.
After World War II, the United States played the role of the world's "biggest", carrying out the so-called democratic export and the export of the American model.
They believe that the whole world should follow the same path as the United States.
But China is very different. The political systems, values, civilization and culture, and economic development models of China and the West are very different.
At the same time, the outside world doesn't know much about China. They don't know what China's goals are and how to be a leader in the world in the future.
Therefore, many "threat theories" come from differences and ignorance, which can easily lead to fear or even demonization.
In addition, the "China Threat Theory" is also a need of domestic politics in certain countries.
Take the United States as an example. There are various problems in the United States. For example, the distance between the elite and ordinary people is getting bigger and bigger. This has become an acute problem in the Trump era.
There are also racial issues, human rights issues caused by extreme liberalism, etc., which have accelerated the division of the United States.
The United States needs an external challenge to gather domestic strength, so it is also its political aspiration to advocate the "China Threat Theory".
China has every right to let its people live a better life. This is something that all countries should agree to and encourage.
To curb China's growth will deprive the Chinese people of opportunities. If you start from the perspective of human rights, this also makes no sense.
Data map: China-Europe Express X8153 train is ready for departure.
Qi Chao photo
China News Agency reporter: What does the rise of China mean to the world?
Jin Keyu:
From an economic point of view, the rise of China has many benefits to the world.
Today is an era of the Internet, and it is also an era of multi-win.
The leader of the Internet age has a completely different meaning from the previous stage of the "central country".
The "central country" in the Internet age is not to contain other participants, but to encourage, help and even support other participants.
The "central country" must protect the Internet, protect internationalization, and protect the entire economic system so that everyone can achieve a win-win situation.
China's role may be mainly played in three aspects:
First, China can act as an "anchor" for global financial stability.
In the event of a global economic crisis or financial crisis, China can serve as a cornerstone and work with the United States and other important economies to stabilize the global financial market and global industrial chain.
Second, the Chinese asset market gives many investors an opportunity to diversify risks.
Relatively speaking, China's stock market, bond market and other capital markets are much less closely related to the capital markets of developed countries.
The proportion of international investors holding Chinese assets is still very small. They can increase the proportion of Chinese assets that can diversify risks to a large extent.
Third, China can provide a large number of good trade opportunities.
In the past 10 years, China’s contribution to global growth has remained almost at about one-third.
Although trade is a win-win situation, some people will be negatively affected.
At this time, it should be the government's initiative to launch some programs to help disadvantaged groups re-employment, but this is what the US government has not done.
Therefore, when Chinese trade comes to the US market, disadvantaged groups lose their jobs or even have no chance to return to the labor market.
At this time, should we blame China’s trade, or should we blame the US government for not helping these people better?
Over the past few decades, the overall level of education in the United States has declined.
The United States should better solve domestic problems.
Reporter from China News Service: Many people worry that once the Fed shrinks its balance sheet, it will repeat the "reduction panic" of 2013 and trigger the economic crisis in developing countries. Can this situation be changed? What role can China play?
Jin Keyu: The
Fed is now facing two major challenges:
One is how to weigh domestic goals and international influence.
The Fed currently acts as the "cornerstone" in the global financial system.
Every change in the Fed's interest rate, including QE, has a huge impact on the world.
However, when choosing these plans, it did not consider the world, but prioritized the needs of the United States itself and ignored policy spillovers.
But the overflow is very large.
Many people can feel that when the Fed cut interest rates, global credit overflowed, and bubbles appeared in many countries, especially developing countries. When the balance sheet was shrinking, developing countries were also negatively affected, and even a financial crisis broke out.
This is a manifestation of globalization, and it is also a problem that globalization has not been able to solve.
As a core country, how to weigh domestic goals and international influence?
The United States has failed to achieve such a balance.
Some people say that a second country is needed, such as China's central bank to play a role to jointly stabilize the market.
There needs to be a certain amount of communication and dialogue between the two central banks to control the situation together.
Second, in recent years, the global share of the U.S. economy has decreased, and the safe assets and highly liquid assets that the U.S. can provide cannot meet global demand.
At this time, another country or economy is also needed to supplement the loopholes in the United States, especially in terms of supporting emerging economies.
Since 2009, China has played such a role: in the financial crisis of developing countries in emerging markets, China has provided liquidity.
Many countries are opposed to the U.S.'s use of the dollar as a political weapon to achieve its political goals.
At this time, many people will support the birth of a new international currency.
The euro can't do it.
Europe has economic stability problems, and countries have not yet truly become a large unified market. Although the European bond market is large, it is actually still separated because of the sovereignty of each country.
This is an opportunity for China.
However, China may not be able to do so at this stage, and it will take a long time for China's financial system to be truly perfected.
In terms of currency, currency requires trust.
Although there is hard power behind an international currency, that is, its economic strength and overall stability, it also has soft power, including people's trust in a country's system. This is where China needs to do more.
(Finish)
Dr. Jin Keyu is a tenured professor at the London School of Economics and Political Science. He is engaged in the research and teaching of international economics, technological competition and Chinese economy.
She holds a bachelor's, master's and doctorate from Harvard University. She has taught at Yale University and the University of California, Berkeley. She currently serves on the editorial board of the top international economic journal "Economic Research Review".