According to a recent report on macroeconomic indicators, the Chinese economy is beginning to stabilize and show strong signs of recovery.

 

According to a recent report on macroeconomic indicators, the Chinese economy is beginning to stabilize and show strong signs of recovery.

The interim report for 2016, titled “Analysis and Forecast of Chinese Macroeconomics—Chinese Macroeconomics Amid Supply-Side Structural Reform,” was released by Renmin University of China and China Chengxin Credit Management Co., Ltd. on June 18. 

According to the report, the continued decline of the GDP apparently slowed in the first half of 2016.

The real GDP grew by 6.7 percent in the first quarter, exceeding the benchmark of 6.5 percent for the whole year but down 0.3 percent year on year and 0.1 percent compared with the fourth quarter of 2015. Nominal GDP growth in the first quarter reached 7.2 percent, an increase of 0.6 percent from last year and 1.2 percent from the fourth quarter of 2015, according to the report. 

This was the first time that growth of the nominal GDP outpaced that of the real GDP, which, based on previous experience, is a significant sign that the economy as a whole is pulling out of recession and starting to recover. 

In addition, the Consumer Price Index (CPI) rebounded fully to more than 2 percent, the decline of the Producer Price Index (PPI) was evidently smaller, and the GDP deflator turned positive. 
The month-on-month PPI growth has also turned positive since March, with the rate for May reaching 0.5 percent. From January to April, core business income of industrial enterprises achieved stable growth, rising 2.3 percent with lower deficits, according to the report. “The real economy, with industry at the core, is vital to the revival of an economy,” said Liu Yuanchun, executive director of the National Academy of Development and Strategy at Renmin University.

“If industry can manage to get out of depression and reverse the five-month trend of decline, it will build groundwork for overall prosperity,” he said. 

According to the report, the turnaround of the GDP deflator, the rally of foreign investments and the sustained rapid growth of emerging industries show the Chinese economy is bouncing back.

 
The report also recommended caution, urging policymakers to grasp the logic of the continuing downturn while facing the realities of sluggish growth due to decreasing labor productivity, diminishing prospective earnings on corporate investments, yawning income gap between real and virtual economy, and weakening domestic demand for consumption and investment.

 

Over the past 10 years, the Chinese economy has shifted from rapid growth to the “new normal” of moderately high growth, scholars said, noting that great progress has been made in China’s macroeconomic theory. A macroeconomic framework with Chinese characteristics has been initially established, and its latest achievement is the theory of supply-side structural reform.Scholars pointed out that China’s situation is different from that of stable, developed economies, which tend to only experience minor fluctuations. It is also unlike ordinary developing countries that are in the stage of economic takeoff. It is growing fast but remains volatile during its current transitional phase.

Liu Wei, president of Renmin University, said that macroeconomics with Chinese characteristics should aim to explain and solve major practical problems related to reform and development based on China’s actual conditions. Scholars should seek new ideas from Marxist political economics while borrowing analytical tools from Western macroeconomics, thus bringing into being a guiding theoretical framework, Liu said.  

 

 

Niu Dongjie is a reporter at the Chinese Social Sciences Today.