Editor's Note：
During the past couple of months, Western politicians and media, particularly those in the US, have spared no efforts to depict China's economy faces the risk of collapsing. In doing so, they have created a number of misconceptions about the state of the Chinese economy, which fall into six categories - from disappointing data to losing appeal to foreign investors. However, such misconceptions are false. While the Chinese economy faces downward pressure amid a global economic downturn, it is steadily recovering, but not collapsing at all. To set the records straight, the Global Times invited two prominent Chinese economists to offer their views on the Chinese economy.
Professor Cao Heping, Peking University
Misconception 1: China's economic data falls short of expectations
Fact: China's economic data actually exceeds expectations
China set a GDP growth target of about 5 percent for this year at the beginning of 2023, and the general expectation from the outside world was above 5 percent. The country's GDP growth rate in the first half of the year exceeded expectations, reaching 5.5 percent, surpassing the set target.
The economic data released on September 15 indicates a marked economic improvement in August. The growth in the third quarter is expected to gain further pace, as it is traditionally a season of increased buying and selling. China's retail sales, investment, PMI, and CPI data in August all reflect the positive effects of a new package of monetary policies.
Given the global economic downturn, coupled with the spillover impact of the Russia-Ukraine conflict, it is unreasonable for Western media to measure China's economy using pre-2019 criteria. Therefore, the so-called below expectations argument by foreign media is flawed in terms of its measurement methods and standards.
Misconception 2: China's trade is falling, imperiling economic growth
Fact: China's trade brings tangible benefits to other countries, including the US
The sanctions imposed by the US on Chinese companies violate global rules and are becoming increasingly ugly. Originally, China and the US had a mutually beneficial and complementary bilateral trade relationship. The US has a comparative advantage in high-tech industries, while China has its own comparative advantages in largely labor-intensive sectors.
However, the US has waged an extended tariffs war against China, imposing punitive duties on many Chinese products, which restricts China's comparative advantages. Meanwhile, the US is adopting increasingly strict export restrictions on high-tech products to China. In other words, the US is using various sanctions and restrictions to eliminate both China's and its own comparative advantages.
The US media claim that the decline in China-US trade is caused by China's economic downturn, which is an attempt to shift the blame for the US economic woes to China. There is still a positive correlation between the demand in the US economy and China's exports. China poses no threat to the economic growth of other countries, but its trade brings many benefits to other countries, including the US.
Misconception 3: Companies are moving production lines out of China
Fact: China's manufacturing sector remains solid, not afraid of competition
Some elements of the giant manufacturing industry are shifting to Southeast Asia or India. This phenomenon has been occurring over the past decade, but China's position as the global manufacturing hub will not be shaken.
With the advancement of technology in China, the country is moving upward in the global value chain in terms of division of labor. Currently, a few companies are shifting their production lines to neighboring countries, similar to how Japan and South Korea transferred their industries to China in the 1980s and 1990s.
However, China's advantages throughout the industrial chain determine that China is not afraid of competition with other countries in manufacturing. In the face of challenges brought by technological advancements and industrial policy adjustments, China has already adjusted public expectations and is preparing itself to fully develop the growth potential embedded in new technologies to seek new growth points for the economy.
Lian Ping, chief economist, Zhixin Investment Research Institute
Misconception 4: China's weak spending is dragging down the nation's economic recovery
Fact: China's home consumption has rebounded consistently in 2023
China's consumption has kept improving in the past two months. Both year-on-year and month-on-month growth of consumption data in August are showing positive signals. In August, total retail sales in China reached 3.79 trillion yuan ($519.7 billion), a year-on-year increase of 4.6 percent, which was 2.1 percentage points higher than the previous month.
Currently, various aspects of China's economy indicate improved expectations in both near-term and long-term. Additionally, an important aspect is the introduction of a series of relaxed policies in the real estate sector, which may revive housing market activity soon.
As China's economic recovery continues to gain pace, there will be fewer instances where foreign media can apply certain data or examples to talk down China's economy.
The argument made by some foreign media commentators that China's high saving rate hampers domestic consumption is untenable. With improved expectations, a high savings rate implies the potential for high growth in the consumption sector.
Misconception 5: China's real estate sector and overall economy are facing long-term decline
Fact: China's real estate sector is stabilizing, not declining
With the recent introduction of a series of pro-growth policies, the real estate sector in China is showing clear signs of recovery. It is possible that a turning point will emerge in the third or fourth quarter.
The real estate industry is closely related to many other sectors, including furniture, decoration, building material and other industries. Therefore, the improvement in the real estate sector is expected to inject more momentum into the Chinese economy in the fourth quarter.
Over the long term, the real estate market is bound to emerge from a relatively volatile situation in the previous months. However, from a global perspective, the real estate market still possesses investment opportunities in many places.
China has the ability to proactively regulate the real estate industry, and the policy approach has been prudent and the adjustment room remains ample. The real estate market is gradually moving toward a more stable phase of development, rather than facing the risk of a crash in prices as claimed by the foreign media.
Misconception 6: China's market is losing its appeal to foreign investors
Fact: China is attracting a record sum of foreign investment
The normal fluctuations of foreign investment in China are due to adjustments in the industrial chain and economic structure. This trend may continue for a period of time.
As China continues to implement its opening-up policy and improve its business environment, there will still be an increasing amount of foreign investors flowing to the country. The numbers speak for themselves. There is no capital retreat as exaggerated by some Western media. There is no such thing as a confidence trap.
The World Investment Report 2023 of United Nations Conference on Trade and Development said that, in 2022, China attracted a record-breaking $189.1 billion in foreign direct investment, an increase of 5 percent year-on-year. Against the backdrop of multiple challenges facing the world economy, China's counter-cyclical readjustment is likely to attract more foreign investment. In the first eight months of the year, China's received FDI in high-tech manufacturing jumped 19.7 percent, indicating the improved quality of Chinese companies in drawing overseas investment.