Analysis and Forecast of China’s Macroeconomic Trend in 2016
Author：邱晓华 Source：深圳创新发展研究院 Date：2016-04-25
Xiaohua Qiu, Chief Economist of Minsheng Securities, Former Director of the National Bureau of Statistics
On the morning of April 23, 2016, Dr. Xiaohua Qiu, a renowned Economist, visited the Shenzhen Innovation and Development Institute and delivered a speech titled “Analysis and Forecast of China’s Macroeconomic Trend in 2016”. Dr. Qiu reviewed the characteristics of China’s economic development between the Reform and Opening-Up and the first decade of this century. Based on his analyses of the dilemma and its sources of current Chinese economy, and the predicted changes that may take place in the coming future, Qiu’s speech anchored upon the issues of China’s growth, inflation, exchange rate, real estate and the stock market.
Qiu summed up the characteristic of China’s economic development between 1978 and 2010 as “rapid”. He believed that the rapid economic development of China in this era benefited from the positive interactions of internal and external factors. External influences mostly concerned the new trend of “Peace, Development, Cooperation” globally in the wake of the Cold War, and the transfers of industries from the West to the East in the context of globalization. The whole world benefited from the peace and globalization in this period of time. On internal factors, the Party and the government focused on economic development after the “Cultural Revolution”. With the Reforming and Opening-Up, the long-undermined domestic, business, public, and local productivity – among many other areas – were released. Population and resources dividend, as well as the dividends of other factors and the previously compromised creativity, were rapidly set loose in this era.
Regarding the issues facing the Chinese economy today, Qiu believed that it was due to the structural changes of both the internal and external environment. Concerning internal environment, China has transformed from a market of scarcity to a market of excesses, yet the products China manufactures remain to be the lower-end of the value chain, unable to satisfy the new market demand as the economy progresses. Obstructive urban-rural institutions – stagnating incomes of the peasants, high costs of properties, education, and healthcare, among other trends – severely undermine the natural consumption level of urban dwellers and rural residents. On the other hand, the low-cost advantage has disappeared, while the problems of environment, resources, and local debts have become evident, hindering our capability to grow. In terms of external environment, the staggering world economy and the disrupted world order, together with a protectionist sentiment replacing the globalization trend, have resulted in a hostile external environment, as opposed to the friendly ambience in the past. These factors have limited the development of the Chinese economy.
Concerning the prospects of the Chinese economy, Dr. Qiu thought that – similar to the views held by other experts – the pattern of the development of Chinese economy would be “L-shaped”, “with a bottom but not rises”. It is hard for China to rise from the bottom in the coming few years.
In terms of inflation, Qiu pointed out that China’s inflation would remain moderate in the near future. While it would not be of major concern immediately, preventive measures should be kept.
Regarding real estate, Qiu believed that, first of all, the golden time has probably ended despite the fact that the sector continues to expand. Secondly, the housing prices level would continue to rise, but would not skyrocket as in the last few years. So when would the real estate market cease to expand such that the housing prices would start to fall? Qiu held the view that changes would arrive when the phenomenon of industrialization, urbanization, population growth end within the coming 5 – 10 years.
Dr. Qiu believed that the issue of exchange rate is the most alarming one. The public and private capital are “going global”, which would result in the decrease in foreign reserves. Meanwhile the US Dollars has initiated the interest rate hike, bringing pressure to the value of Yuan. China is indeed facing periodic Yuan devaluation, but the exchange rate is unlikely to observe a prolonged period of devaluation.
Qiu summarized issues concerning China’s stock market in two points. “The pig has died,” the times of unilateral market had ended, with no prospects of “mad bull”; Secondly, “but the bull is not dead yet” as the long-term prospects of the China’s capital market is still anticipated. He reminded investors to be cautious about the bull market prospects, as they must keep preventive measures on market and policy risks.
On the morning of April 23, 2016, Dr. Xiaohua Qiu, a renowned Economist, visited the Shenzhen Innovation and Development Institute and delivered a speech titled “Analysis and Forecast of China’s Macroeconomic Trend in 2016”. Dr. Qiu reviewed the characteristics of China’s economic development between the Reform and Opening-Up and the first decade of this century. Based on his analyses of the dilemma and its sources of current Chinese economy, and the predicted changes that may take place in the coming future, Qiu’s speech anchored upon the issues of China’s growth, inflation, exchange rate, real estate and the stock market.
Qiu summed up the characteristic of China’s economic development between 1978 and 2010 as “rapid”. He believed that the rapid economic development of China in this era benefited from the positive interactions of internal and external factors. External influences mostly concerned the new trend of “Peace, Development, Cooperation” globally in the wake of the Cold War, and the transfers of industries from the West to the East in the context of globalization. The whole world benefited from the peace and globalization in this period of time. On internal factors, the Party and the government focused on economic development after the “Cultural Revolution”. With the Reforming and Opening-Up, the long-undermined domestic, business, public, and local productivity – among many other areas – were released. Population and resources dividend, as well as the dividends of other factors and the previously compromised creativity, were rapidly set loose in this era.
Regarding the issues facing the Chinese economy today, Qiu believed that it was due to the structural changes of both the internal and external environment. Concerning internal environment, China has transformed from a market of scarcity to a market of excesses, yet the products China manufactures remain to be the lower-end of the value chain, unable to satisfy the new market demand as the economy progresses. Obstructive urban-rural institutions – stagnating incomes of the peasants, high costs of properties, education, and healthcare, among other trends – severely undermine the natural consumption level of urban dwellers and rural residents. On the other hand, the low-cost advantage has disappeared, while the problems of environment, resources, and local debts have become evident, hindering our capability to grow. In terms of external environment, the staggering world economy and the disrupted world order, together with a protectionist sentiment replacing the globalization trend, have resulted in a hostile external environment, as opposed to the friendly ambience in the past. These factors have limited the development of the Chinese economy.
Concerning the prospects of the Chinese economy, Dr. Qiu thought that – similar to the views held by other experts – the pattern of the development of Chinese economy would be “L-shaped”, “with a bottom but not rises”. It is hard for China to rise from the bottom in the coming few years.
In terms of inflation, Qiu pointed out that China’s inflation would remain moderate in the near future. While it would not be of major concern immediately, preventive measures should be kept.
Regarding real estate, Qiu believed that, first of all, the golden time has probably ended despite the fact that the sector continues to expand. Secondly, the housing prices level would continue to rise, but would not skyrocket as in the last few years. So when would the real estate market cease to expand such that the housing prices would start to fall? Qiu held the view that changes would arrive when the phenomenon of industrialization, urbanization, population growth end within the coming 5 – 10 years.
Dr. Qiu believed that the issue of exchange rate is the most alarming one. The public and private capital are “going global”, which would result in the decrease in foreign reserves. Meanwhile the US Dollars has initiated the interest rate hike, bringing pressure to the value of Yuan. China is indeed facing periodic Yuan devaluation, but the exchange rate is unlikely to observe a prolonged period of devaluation.
Qiu summarized issues concerning China’s stock market in two points. “The pig has died,” the times of unilateral market had ended, with no prospects of “mad bull”; Secondly, “but the bull is not dead yet” as the long-term prospects of the China’s capital market is still anticipated. He reminded investors to be cautious about the bull market prospects, as they must keep preventive measures on market and policy risks.
