Is China’s economy heading toward a hard landing? The U.S. media seem to think so. Talking heads on the morning shows and presidential candidates alike are pointing fingers at China’s slowing growth — which still exceeds 6 percent — as the cause of the U.S.’s stagnating growth. Is China really to blame, though?
China intends to restructure its economy by adjusting to macroeconomic changes elsewhere. Lack of consumption in the U.S., now staring down stagflation after a decade of rigged monetary policy, compounding national and household debt, is factored in as part of China’s retooling. It is not the only consideration, however. A major navigational shift in China’s economy is under way, as the country digests domestic economic concerns.
The nation’s leadership has identified hypergrowth as one of its own main problems. The outsize growth that pulled 700 million people from poverty within three decades also left chemical and fossil fuel damage to China’s environment. Rather than pushing for expansion at any cost, the new priority has become food, water and health security. These problems arise from the same growth model that the leadership once assumed would ensure social stability — and the same one that institutional investors presumed would ensure global market resurgence.
The world’s second-largest economy is taking its foot off the gas pedal and replanning its cities, as well as making strides toward a shift from fossil fuels to renewables and nuclear energy. (Coal accounts for 70 percent of China’s energy base.) Entire factories will be shut and get revamped with a view to energy efficiency. In addition to creating new jobs, these moves will help make green energy China’s next major export and economic driver.
Another example of China’s economic policy readjustment is the country’s drive to invest in the most underdeveloped nations, in constrast to the push over the past three decades to lure foreign investment into China from the world’s biggest economies. China’s “One Belt, One Road” development initiative romantically evokes the ancient Silk Road. But this conduit of enterprise is not about porcelain, tea and textiles but about badly needed infrastructure — road, rail and port networks — essential for the nations in question to get out from underdevelopment. This outbound policy is underscored by an emerging financial architecture that includes the Asian Infrastructure Investment Bank, the Development Bank (formerly the BRICS Development Bank) and the Silk Road Fund.
Underlying all of this is the deeper issue of security. Financing of desperately needed infrastructure, connectivity, urbanization, clean energy and health care systems across South and Central Asia and Africa will help transform the lives of billions for the better. Yes, China’s policy of outbound investment and finance may do more toward reducing regional conflict and terrorism than a certain other country’s bombing of schools with drones.
Nevertheless, analysts point to China’s stock market as the cause of global meltdown. Should we question this too? Volatility in China shocked global markets in 2015, when some of the first leveraged instruments were introduced as a test. Speculation led to a bubble that burst. Regulators shut down the market to protect investors and then rebooted. Were these decisions responsible or not? In the context of the country’s total economy, the stock market represents a mere 30 percent of gross domestic product. For China, it is an experiment. As a point of comparison, capital markets in the U.S. represents 120 percent of GDP. In short, the capital markets are the U.S. economy. We do not do real business anymore. But China does.
For the past decade, few decisive decisions on the U.S. economy have come out of Washington. An aura of wishy-washiness prevails. Even Federal Reserve chair Janet Yellen cannot speak straight on a single issue before Congress. Major news networks can disguise the fragility of an economy that recently grew at 0.04 percent by blaming China or some other foreign country that most Americans could barely find on a map. For the rest of the world, however, such a stance can’t hide the lack of decisiveness in tackling our own problems of collapsing infrastructure, failure to recognize climate disruption as a security threat and the inability to create real businesses at home.
This, however, is not the case in Beijing. The leadership in China has made some tough but very calculated decisions. The world has watched. Even with the administration of President Barack Obama telling ally nations not to join the Asian Infrastructure Investment Bank, 57 countries already have done just that — including the U.K., the U.S.’s ever-earnest ally. If we believe Washington still shows global leadership, shouldn’t we ask why other nations don’t agree?
When China Premier Li Keqiang presented his work report to the National People’s Congress last month, institutional investors and financial media analysts were left gaping as they were waiting for his pronouncement on growth. Did they not pay attention to the clear and decisive announcements on restructuring the soon-to-be-largest economy in the world? Most predicted a hard landing. Some even declared the imminent collapse of China’s economy, citing that it is not a democracy, whereas most of the world stands by laughing at our current money-saturated buffoon-candidate presidential election.
No wonder that most international media network coverage of the 2016 presidential election is hardly more than side-eyed mockery.
The world is left wondering which cadre of leadership — Washington’s or Beijing’s — is best at tackling climate disruption, poverty and infrastructure development and offering a clear path for the nations of the global south. For most, it is clear. Good morning, America.
Laurence Brahm is an international lawyer, mediator and economist and has served as senior adviser to China’s Ministry of Environmental Protection.
