Opinion | One global observer, economist and a consumer are all confident: China can wrestle inflation to the ground

By Augustus K. Yeung

At the strike of the mid-night clock, when the world sleeps – amid worries of two conflicts and fears of inflation – China's economic resilience is gaining a rebirth.

In this article, we marshal the wisdoms of an expert on economics and finance, the chief economist of Morgan Stanley, plus a well-informed reader of the South China Morning Post.

Listen to what they have to say about the state of China's economic development as we cross the tunnel of timeline into 2024. Will it be a year of austerity amid fears of two raging conflicts, one in Eastern Europe and another in the Middle East? Will China be a beaming beacon of hope?

One philosophical truism: As countries fight, exhausting themselves out of natural and human resources, the ones which are industrious and love peace will rise to the occasion.

China and the countries in the Asia-Pacific region belong in the ones who work industriously and love peace and prosperity.

This oversimplification will guide our reading and thinking.

China has made remarkable progress in its economic recovery, says Morgan Stanley Chief China Economist Robin Xing, adding that although there are still challenges – he is optimistic about the country's economic growth prospects.

"There is not much question that China can achieve its 5-percent government target for this year," Xing said in an exclusive interview with Xinhua.

The low base from last year when China was battling the COVID-19 helped, he added – and the country's export and manufacturing growth has also been resilient this year.

Concerning China's deflation risks, Xing stated that the country's tepid consumer price index, a main gauge of inflation, is due in part to the hog price cycle and oversupply brought by the legacy issues in the last two to three years.

"If you exclude food and oil and just look at the core goods, the price level is growing," he said –adding that China is trying to address these potential deflation risks with more policy support.

Xing believes China can overcome the middle-income trap – and achieve its long-term goal of becoming a high-income economy in 2035.

China's growth potential is high, Xing remarked, citing the fact that China's per capita GDP only registered over 12,000 U.S. dollars in 2022, or around 17 percent of that in the United States.

"For the next three to five years, we believe China can still deliver a decent growth," he said.

Xing praised Chinese professionals in numerous areas for their awareness of innovation and services, saying that effective policies are needed to support Chinese entrepreneurs and residents' industriousness, courage and pursuit of a better life.

"There is definitely a lot of policy firepower if China's policymakers want to boost the economy," said Xing, adding that the Chinese central government's balance sheet is probably one of the healthiest among major economies.

During the annual Central Economic Work Conference held earlier this month, China committed efforts next year to pursue progress – while ensuring stability, consolidate stability through progress, and build the new before destroying the old, which Xing perceives as "a very practical philosophy."

The meeting also noted that steps should be taken to improve the consistency of macroeconomic policy orientation and coordination on fiscal, monetary, employment, industrial, regional, sci-tech and environmental policies, as well as to include non-economic policies in the assessment of macroeconomic policy consistency to ensure that the policies create synergy.

Xing believes that the arrangement has sent positive signals to foreign firms and investors. "That's a new line, and that's very important. Once it's really getting delivered, I do think it could help gradually bring back confidence." (Source: MDT/XINHUA)

Post reader Randy Lee of Ma On Shan: Mainland China the only haven from inflation

While many are holding out hopes that 2024 will be a better year, I am going to break with convention – sorry, folks – and warn of a bad year for everyone, possibly due to inflation. The past couple of years have seen rapid inflation around the world, except China.

One factor was the war in Ukraine, which drove up prices of oil and gas. In Britain, millions could not afford to heat their homes in severe cold weather.

However, now that we seem to be seeing the light at the end of the tunnel of global inflation, another wave of crises might come from the Red Sea, where Yemen's Houthis have been attacking commercial ships in a bid to pressure Israel into ending its bombing of Gaza.

Since the Red Sea is a key artery of global trade, this crisis in the Middle East may well lead to another wave of inflation around the world, unfortunately.

Meanwhile, China has staved off inflations – probably due to its measured monetary policy during the Covid-19 pandemic. So, you would expect Hng Kong, whose main source of goods is the mainland, to be enjoying the same low prices.

And yet, speaking as someone who lives in Hong Kong, I still feel the pressure of inflation. Sometimes it feels as if I am merely making ends meet. Why is this the case? Could it be that some merchants among us are hiking prices unscrupulously, to boost revenue?

But do not discount the hard fact that some Hongkongers will then be happier to spend their money up north.

Many of my friends are already doing so, and I may soon follow them, because as far as I can see – mainland China is the only haven from inflation now. (Source: SCMP)

As they say, "confidence" is the name of the game. When economists, foreign firms, the investors and the consumers in the Hong Kong and Macau SARs are confident about China's rapid economic rebound – the state of economy is resilient, and looking brighter than any other countries in the world – because when it comes to fighting inflation, consumer confidence boosted by the Beijing government policy is the magic word.

 

To contact the writer, please direct email: AugustusKYeung@ymail.com

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