By Shafei M. Hali
Illustration by Robert Wiggin
On 16th of March 2016, the 12 day secession of China's legislature ended and Premier Li Keqiang met the press. The importance of this press conference lies in the fact that during the past 12 days China's new five year plan was being fine tuned by its legislature and this five year plan comes at a time when the world's second largest economy is sailing through choppy waters in the wake of an economic transition and a flagging global economy. Li had admitted in his inaugural address to the legislature that it is going to be "a difficult battle" but in yesterday's press conference the Premier seemed much more upbeat, primarily because of the successful finalization of the five year plan.
Speaking to the reporters at the press conference, The Premier highlighted the growth targets, unemployment risks, corporate debt, new technology and innovation, Sino-U.S. relations, relations with Russia and Japan but most importantly on Wednesday he emphasized that the economy despite facing challenges is in no danger of a hard landing.
At the press conference a number of questions were asked by various national and international media outlets, to name a few; Reuters, Xinhua News Agency, NBC, China News Service, Bloomberg News, People's Daily, China Radio International, Spanish News Agency EFE, Phoenix TV, Russia Today, China Daily, CTI Television Incorporation, China National Radio, Nikkei Business Daily, CCTV, and Farmer's Daily.
There is a famous saying regarding the relationship between the US and the world economy, and it goes like this: "if the US economy sneezes the world catches a cold" similarly when we see the world's second largest economy transitioning and undergoing rigorous reforms towards a market and consumer demand oriented economy the economy is bound to slow down and a few hiccups are bound to be experienced as we saw a few mild but short lived scares in China's stock market in 2015. Just like the US economy the world's second largest economy is also intertwined with the rest of the planet, it is safe to postulate that "if the Chinese economy feels an itch, the world economy will get the pox" especially when China is responsible for 35% of the world economy. There is bound to be a lot interest in China's economy and its transition and more specifically this new five year plan. The Q&A secession covered a wide range of questions concerning the Chinese economy. Ranging from financial stability, meeting growth targets, China-US relationship to drive the global economy, Pension funds, Reforms and Layoffs, Reforms and Market access, Issues in the Asia-Pacific region, issue of preserving cultural relics, Hong Kong's future, New economy, China-Russia trade relations, Medical insurance, government openness, social security packages and Grain prices including agricultural subsidies.
Mr. Li answered all the questions in detail and painted a clear path of how China is set to achieve its annual economic growth targets while at the same time the government is going to strengthen the supply-side reform. The premier showed a lot a confidence in the government's capacity to anchor the economy "if it slides below the appropriate range" apart from pivoting policies to counter economic issues the Belt and Road initiative will provide a lot of support and investments to advance the economy.
Regarding Sino-U.S. relations, Premier Li said that China-U.S. cooperation is the key to benefit Asia-Pacific stability as without cooperation and peaceful talks which is China's stance, negotiations cannot take place for a peaceful resolution and Premier Li said that "China-U.S. relations will move forward regardless of U.S. election result."
When the Sino-Russia relations were touched upon, the Premier explained that relations with Russia have stood the test of time and will be unscathed despite changing international situations, and regarding relations with Japan the Premier hoped that "relations do not retrogress as bilateral ties have shown signs of improvement."
A lot of focus has been given in the government report and was also given in the press conference to the "new economy" Li explained the concept of new economy and said, "we will foster new growth engines to help promote economic restructuring."
Even though a lot of the world media is skeptical of the economic conditions in China, one should not get fazed by this negative skepticism which is usually based on misinformation and half truths. With China's economic reforms gaining ground a lot of positives have been observed. Indeed the economy has slowed down but most certainly there will be no hard landing because one has to keep in mind that China is still a developing country with a government with pockets which run very deep and hence the word "developing" should be enough for people to understand that there is still tremendous room for growth and investment, almost the entire western side of China is under developed and plans have been set in motion to overcome this.
A lot of economists and experts talk about the hurdles and challenges which most economies faced in the wake of transition from manufacturing to services driven and these economists argue that those economies went through prolonged periods of busts before revitalizing. China's case is quite different because China's economy is massive and large scale economies with strong foundations do not hit rock bottom abruptly it takes time. One can take the example of the economy of the US it is the world's largest economy and despite facing many challenges in the recent past due to the financial meltdown in 2008 it still hasn't had a hard landing. Similarly China's economy is integrated in to the world economy and with the global economy slowing down it has compelled China to switch off its after burners to sail at a normal pace this slow down is not a hard landing, simply a shift in gears to implement reforms. The major challenges of transition include; unemployment, bankruptcies, bad debts and capital reappropriation e.t.c. Chinese government certainly has answers to these challenges because as compared to the last time China faced a transition, its economy has grown 10 folds, The government's pockets are much deeper thus holding the promise of a much wider social security safety net and Premier Li pledged that a government fund of $15.4 billion could be bolstered if needed to lessen the impact on ordinary Chinese.
The Author: Shafei Moiz Hali has a master's degree from George Mason University, Virginia, USA in the field of International Commerce and Public Policy. Mr. Hali has been working as an Assistant Professor at the National Defence University (NDU), Islamabad, Pakistan with the department of Government and Public Policy Since 2009. Currently he is pursuing his PhD from the College of Public Administration at the Huazhong University of Science and Technology (HUST), China.