Stephen Middot; Roach
The government of US President Trump underestimated China's toughness and strategic determination.With the slowdown of China's economic growth, the United States believes that China is being harmed and eager to end the trade war.However, Chinese leadership has sufficient policy space to cope with the current economic slowdown, and there is no need to abandon its long -term strategy.Although a surface agreement that focuses on bilateral trade seems to be completed, the huge difference between the fundamental foundation between the two major economies clearly shows who is the upper hand.
Indeed, the Chinese economy has obviously weakened in the past few months, but this is not derived from the US tariff strategy, but to a large extent, it is the result of China for benevolence.The decline in China's economy began with a deleveraging operation, which aims to eliminate the increasing risk of debt -intensive economic growth.It is worthy of recognition that Chinese policy makers have adopted positive actions to avoid the terrible Japanese syndrome. Its symptoms include not only overpopulation of debt, but also a large number of zombie companies and the productivity challenges caused by it.
Generally speaking, it is precisely because of this action that China ’s credit growth has slowed from about 16%in early 2016 to about 10.5%at the end of 2018.This has caused a significant impact on China's very powerful investment engine, and investment has always been the largest part of the Chinese economy.China's investment growth has been reduced from 20%at the end of 2013 to about 6%at the end of 2018.
At the same time, the influence of US tariffs has just begun to appear.Although China ’s exports to the United States in December 2018 and January 2019 decreased by about 3%year -on -year, exports to other parts of the world continued to expand, mainly due to the continued toughness of emerging markets (especially Asia).As the New Year holiday and US tariffs in the lunar calendar have further increased their shipments, and a part of export growth has been pre -saved, some Chinese exports are expected to fall.Although this may dilute the short -term prospects, it is difficult to blame the economic slowdown in the past few months.
In order to hedge related risks, China has quickly utilized its inherent advantages: Compared with the greater flexibility of the Western economy, Western countries have basically reached the limit in terms of financial and monetary stimulus measures.China has reduced the deposit reserve rate five times in the past year, prompting bank loans to increase, and credit growth has also begun to rise earlier this year, which will support the overall economic activities in the middle of this year.
In contrast, the US economy relies on short -term momentum.Thanks to the large -scale tax cuts at the end of 2017, the economic growth of the United States in 2018 rose to about 3%, which was nearly one percentage point faster than the weaker growth rate of 2.2%in the first eight years.However, with the weakening of fiscal stimuli, the growth of GDP (GDP) in the United States will slow down, which is consistent with the latest forecast of the US Congress's budget office only 2.3%in 2019.
The risk of weaker trend is also increasing.The rebound of the US stock market in early 2019 did not offset a sharp decline in the end of 2018. The latter seriously weakened family wealth and consumer confidence, leading to a sharp decline in retail sales in December.As the number of people who applied for unemployment relief began to rise slowly, the housing market was still weak, and the global economy was becoming increasingly turbulent, and the Federal Reserve has limited ammunition, and the toughness of the US economy seemed to become more and more fragile.
The improvement of the Chinese economy under the promotion of policy, the slowdown of the US economy caused by the restrictions on policy, and the different growth trajectory of the United States and China, making the long -term fundamental gap between the two countries even more disparate.In 2018, China's domestic savings rate reached 45%of GDP, almost 2.5 times the United States of 18.7%.Although China's savings rate has fallen from 52%in 2008, due to the re -balance of consumption, it has prompted excess savings to turn to absorb savings. China still has a buffer space for the United States.
In addition, 85%of the total US savings are used to replace the old capital stock (Capital Stock).Considering the depreciation factor, the US national net savings rate in 2018 was only 3%, and the average of 6.3%in the last 30 years of the last century was less than half of the net savings rate of China, and China's capital stock was quite new., Do not need to be replaced.
The differences between these savings are highlighted, and there are significant differences in the investment foundation of the two major economies.In 2018, China ’s investment accounted for 44%of GDP, more than twice as many as 21%in the United States.Moreover, considering the increasingly aging capital stock in the United States, the gap between the net investment positions of the two major economies to increase production capacity is even greater.This reflects China's relative advantages in terms of urbanization, infrastructure investment, human capital, research and development, and long -term growth needs such as independent innovation transformation.
In addition, as the US budget deficit that seems to have been long -term has further lowered domestic savings, the gap between the Savings between the United States and China may continue to expand in the next few years.Another complex factor is that in order to pay limited investment potential, the United States will need the same long -term regular account deficit to make up for the downturnal domestic savings.Of course, with the frequent account deficit, it is a huge multilateral trade deficit.This also reveals the weakest part of the unrelated trade agreement, that is, the United States can only rely on bilateral agreements with China to solve the more severe deficit between it and more than 100 trading partners.
Finally, economic strength is relative.The power of the US economy seems to be just a flash.Its short -term toughness is the end of the crossbow, and in view of its long -term fundamentals, its toughness may be weakened further.The situation in China is exactly the opposite: short -term weakness of the present should end in the middle of the year, and its long -term fundamentals should be relatively stable.For American negotiation representatives, which misunderstand China's strength and overestimates the actual benefits brought about by a superficial trade agreement, this reality will be a good stick.
Author Stephen S.Roach is a senior researcher and senior lecturer at Yale University, former chairman of Morgan Stanley Asia, and writes imbalances: The UNBALARANCED: The CodePependency of America and China).
Original English: Misreading Chinarsquo; S Streangth
Copyright: Project Syndicate, 2019.
