Source: Wu Ge et al, "How long will the strong exports last? (强势出口到何时？)", China Finance 40 Forum, November 26, 2020, http://www.cf40.org.cn/news_detail/11439.html
Chinese economists debate the duration of this export bonanza. Some see it as a short-term windfall. Others seem confident it will last through 2021, where YoY export growth could hit 6%, for two interrelated reasons. In their own words: "Faced with the second epidemic in the fall and winter, the developed countries can only implement a new economic lockdown and a new round of fiscal stimulus if the vaccine is not fully effective(…) If the new round of fiscal stimulus is delivered on schedule (…), the party in the capital markets will not stop".3
China first, and a renewed mercantilism
In short, Western pessimism is Chinese optimism. China’s economy will keep growing through exports to developed economies with a production gap created by the pandemic. One must say that this seems to coincide with concrete policy on several fronts, such as the renewed preference for the state-driven economy over market, the reining in of non-traditional finance (digital platforms such as Alibaba) which boosted consumer spending power, and the very limited scale of social expenditures: the anti-poverty plan that is a mainstay of official policy is geared to transfer more low-wage workers to industry rather than to boost local purchasing power. It does clash, however, with the stated intent of the new "dual circle" economy, which is supposed to fire China’s second growth engine, i.e. its own domestic market.
It also seems to create some controversy within China’s financial circles – one of the last that seems conceivable in the Xi Jinping era. Recent publications cited above from the China Finance 40 Forum include criticism or polite suggestions to pursue a more proactive support policy: more 5G investment, renovation of city centers, and support for auto purchases in the countryside. From a European perspective, it is useful to mention that these proposals do not seem to include any mention of "greening" the demand side: this is surprising since there is no lack of green industrial sector policies. These suggestions are rounded by Yu Yongding. The noted economist repeats a plea he has made for several years now to initiate more proactive fiscal policies and a looser monetary policy, and to emulate the Western central banks in buy-back schemes for public bonds, in order to create the conditions for a more sustainable growth.4
Even expressed by a fairly mainstream financial forum, this seems to be a fringe view. Instead, a new Chinese ordoliberalism, combined with renewed mercantilism, are the crux of present macro-economic policy under Xi Jinping.
1 Interviews of Yu Yongding & Zhang Bin (Institute of World Economics and Politics, CASS), and Zhu He (China Finance 40 Forum),
China Finance 40 Forum, "What are the highlights and concerns of the third quarter economic data? Will the next step be monetary or fiscal? (三季度经济数据有哪些亮点和隐忧？下一步发力靠货币还是财政？)", October 20, 2020, http://www.cf40.org.cn/news_detail/11349.html.
2 Wu Ge et al, "How long will the strong exports last? (强势出口到何时？)", China Finance 40 Forum, November 26, 2020, http://www.cf40.org.cn/news_detail/11439.html.
3 These views are attributed to some Chinese economists by Zhu He, "Where do the three divergences in the current round of China's economic recovery come from? (本轮中国经济复苏的三个分歧从何而来?)", November 21, 2020, https://mp.weixin.qq.com/s/e-7NttX_5CszipHeDSFhUw.
4 Yu Yongding’s Interview by China Finance 40 Forum "What are the highlights and concerns of the third quarter economic data? Will the next step be monetary or fiscal? (三季度经济数据有哪些亮点和隐忧？下一步发力靠货币还是财政？)", October 20, 2020, http://www.cf40.org.cn/news_detail/11349.html.
Copyright: Hector RETAMAL / AFP