A man inquires about financial services at a bank. China’s growing role in financial governance is instilling new vitality into the world economy.

 

Scholars have hailed China’s efforts to restore confidence in the shaky global economy, citing Chinese Premier Li Keqiang’s recent remarks that the world’s second largest economy “is not heading for a hard landing.” Li made the comments at the World Economic Forum’s annual meeting in Davos, Switzerland, on Jan. 21.

In his speech at the forum, Li rebuffed foreign media reports dampening expectations about China’s economic growth and instead raised hopes of a global economic recovery.

Pessimism about China has been attributed to its economic slowdown, heavily indebted local governments and enterprises, and looming financial risks.
 

China’s GDP grew by 7.4 percent in 2014, down slightly from the previous year. Wang Yiwei, director of the Center for European Studies at Renmin University of China, noted that the country’s economy has entered a state of “new normal.” “New” means the Chinese economy will no longer grow at a super-high rate, while “normal” indicates that the medium- and high-growth rate will continue, Wang explained.
 

Gloomy predictions about the Chinese economy have been made in past decades. However, the country still strides forward optimistically, keeping steady pace with “no dramatic ups and downs,” said Cao Heping, a professor at the School of Economics at Peking University.
 

Regarding the Chinese debt crisis hyped up by the West in recent years, Cao said local debts of the Chinese government are “totally controllable.” In addition to unified management of the state’s debt system, possibilities concerning nationwide systemic risk have basically been ruled out, so there is no likelihood that local debts will bring down China’s economy, Cao asserted.
 

In future, China’s economic development will face favorable domestic and international factors as the world economy continues to recover and Chinese macro-control policies gradually produce desired results, predicted Xu Hongcai, director of the Department of Information at the China Center for International Economic Exchanges.
 

With strategic concepts like the “Silk Road Economic Belt” and “21st Century Maritime Silk Road,” and the Asian Infrastructure Investment Bank (AIIB) and BRICS Development Bank garnering support from many countries, China has contributed strategically insightful plans to coping with sluggish global growth, Xu added.
 

In the present day and age when restructuring is necessary to all countries around the world, Europe, the most-watched, economically-vulnerable region, is wrapped up in implementing new quantitative easing policies to buy time for structural reform and avoid overall deflation, said Gao Haihong, director of the Research Center for International Finance at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.
 

In this scenario, China has taken an active part in global financial governance, instilling new vitality into the world economy as evidenced by positive results achieved in new financial entities, such as the AIIB.
 

China’s participation is conducive to increasing the say of emerging economies in international financial rulemaking, which conforms to the new world economic pattern and will contribute to the stability of global finance, said Gao.
 

Since 2008, fresh financial turmoil has plunged the world economy into cyclical fluctuation. “Owing to its prudent monetary supply, China will avoid being caught in the ‘liquidity trap’ ensnaring the European Union (EU), which has failed to tackle price declines in staple commodities,” said Ding Jianping, director of the Research Center for Modern Finance at Shanghai University of Finance and Economics.

Wang noted that the world economy is confronted with “dual risks,” which denotes uncertainties brought by global economic recovery and geopolitical conflict.
 

“Nonetheless, China is on track to become an important force driving global economic growth. Its contribution to the world economy accounted for 28 percent on average over the past five years, nearly 10 percent higher than the US,” added Wang.

 

Zhang Junrong is a reporter from Chinese Social Sciences Today.