22.07.2020
The peculiarity of the Chinese economy is not only high rates of economic growth… This is a relative indicator of economic development. It demonstrates the potential of the country’s economy, the availability of certain economic opportunities. That is why high rates of development are characteristic of developing economies and markets. China has such opportunities.
According to the General Statistical Office of China, in the first half of this year, the Chinese economy gradually overcame the negative impact of the pandemic and showed the dynamics of recovery, which demonstrated the flexibility and viability of the development of the Chinese economy. In particular, China’s gross domestic product /GDP/ increased by 3.2% in annual terms in the second quarter of 2020. At the same time, this figure is 1.6% less than in the same period last year and amounts to 45.66 trillion yuan. The reason for this is the coronavirus infection, which continues to spread around the world, and its huge negative impact on the global economy continues to grow, which clearly increases external risks and challenges, the recovery of the Chinese economy is still problematic.
In terms of the recovery of the Chinese economy, it is significant that there is a gradual increase in industrial production, the index of the service sector has increased, the situation on the labor market has improved in terms of reducing unemployment. However, there are also negative indicators that relate to real estate investments, a drop in retail sales. In general, the positive dynamics of the Chinese economic recovery will continue in the second half of this year, thanks, in particular, to significant stimulation of the development of new industries and business models, as well as the state policy of macroeconomic stabilization.
Even the current depressed state of the world economy, which China used to focus on as one of its main production centers, can hardly somehow affect the development of the Chinese economy. Although, of course, China is experiencing some discomfort from the sanctions measures on the part of the wealthy markets of the West and America. He has to diversify his economic priorities from foreign markets to domestic ones. This is not an easy task. But I believe that the plans of the Chinese leadership to develop the domestic consumption market are correct and timely in the era of total economic protectionism. Regarding the prospects for further development of the Chinese economy, in my opinion, it is necessary to “cool down” the economy somewhat. This means that we should pay attention not to quantitative indicators, but to the quality of the economy, its ability to quickly adapt to changes in the global economic environment. It is necessary to invest more thoughtfully in foreign markets. To audit many projects abroad. In general, to strengthen the functional power of the national economy. The existing cliche “the first or second economy of the world” does not matter much. The world today is not built in a linear hierarchy. Rather, it should be about their own economic viability, stability, a balanced balance of payments and the socio-economic situation of the country’s population. This is how I see the tasks of further development.
The world economy in the context of China’s economic strategy
The world economy is currently in a state of severe turbulence. Therefore, focusing on it, on the sudden rises and falls of its individual segments and indices does not allow us to determine trends. Of course, the importance of the Chinese economy in the world ranking of countries is great, but the risks of excessive participation in global economic processes are also significant. The markets are extremely unstable. Therefore, the importance of the Chinese economy in its various sectors is different. We need to look at the dynamics of specific economic niches. For example, according to the Ministry of Commerce of the People’s Republic of China, in the first half of this year, the volume of direct non-financial investments from China abroad decreased by 0.7% in annual terms. Thus, Chinese investors have made direct non-financial investments in 159 countries and regions of the world in the amount of 362.14 billion yuan /about 51.5 billion US dollars.
China’s domestic market has a great potential for maintaining global economic activity. China’s consumer market with a population of 1.4 billion people demonstrates the potential to mitigate the consequences of the epidemic and further develop in the long term. According to Chinese experts, the country should take measures aimed at increasing high-quality products and services, as well as stabilizing employment and supporting people with low incomes to stimulate consumption. The main emphasis should be placed on the fact that the means of fiscal and financial policy, such as reducing taxes and fees, loans with low interest rates and injecting market liquidity, stimulate its development.
As for the further development of the world economy in the second half of the year, it seems to me that the negative scenario associated with the global economic recession and the unresolved problem of the pandemic will continue. Borders will be closed, or economic communication between different markets will be limited, unstable and unbalanced. The national governments of the countries will have to develop and adapt their economic strategies to these challenges, strengthen the functional self-sufficiency and stability of their own markets and support significant domestic economic entities “afloat” in order to prepare them for global competition in the future in the conditions of post-pandemic world economic development.
With regard to the Chinese recovery model and its role in stabilizing the world economy, we can say that after the initial stage of economic recovery is completed, by stimulating the resumption of production and restoring the supply sphere in the economy, China moves to the next stage – stimulating the expansion of demand and restoring economic chains and cycles. And this can directly affect the countries that participate in the well-known Belt and Road initiative, where Kazakhstan is one of the essential links of the continental corridor in Eurasia.
As one of the first countries to effectively contain the epidemic and restart the economy, restore and strengthen the economic foundations, China is of paramount importance for the global economy. Economists predict that in 2020, China’s annual GDP growth is likely to reach about 3% on an average annual basis, which may become a kind of starting point for the recovery of the global economy as a whole.
Economic difficulties of Kazakhstan and China
The economy of Kazakhstan, like many economies of the world, is experiencing difficult times today. For example, as an oil-producing country, we are experiencing serious imbalances associated with the volatility of energy prices. There is a problem of economic diversification, its binding to the dynamics of world raw materials markets, the problem of insufficient technological development, the lack of congestion of the national transport and logistics network. The sector of small and medium-sized businesses and the service industry are experiencing serious difficulties, which have taken the brunt of the government’s quarantine measures. The large social burden on the state and the growth of unemployment in the context of the pandemic have hurt the social well-being of the majority of the population and the effectiveness of measures to combat the pandemic. Large enterprises of the industrial and agro-industrial sectors are experiencing serious stress, needing stabilization measures from the state and improving the situation on world markets.
Economic difficulties of Kazakhstan and China
The economy of Kazakhstan, like many economies of the world, is experiencing difficult times today. For example, as an oil-producing country, we are experiencing serious imbalances associated with the volatility of energy prices. There is a problem of economic diversification, its binding to the dynamics of world raw materials markets, the problem of insufficient technological development, the lack of congestion of the national transport and logistics network. The sector of small and medium-sized businesses and the service industry are experiencing serious difficulties, which have taken the brunt of the government’s quarantine measures. The large social burden on the state and the growth of unemployment in the context of the pandemic have hurt the social well-being of the majority of the population and the effectiveness of measures to combat the pandemic. Large enterprises of the industrial and agro-industrial sectors are experiencing serious stress, needing stabilization measures from the state and improving the situation on world markets.
And here the cooperation of Kazakhstan and China is quite capable of stabilizing the situation and even activating it. For example, we are talking about the trade and economic stabilization of relations between our countries, the restoration of trade growth. For us, the presence of a capacious and steadily growing Chinese consumer market, for example, food products, is a great boon. However, experts predict that the biggest obstacle to our joint economic recovery is insufficient demand for the products of our countries. For the commodity-producing economy of Kazakhstan, it is an even more acute problem than the disruption of the supply chain for China. The PRC is taking decisive measures to actively expand domestic demand and restore a regular market cycle in the global economy. While Kazakhstan has little influence on the conjuncture of world prices for its own raw materials and changes in its consumption on a global scale.
We, like China, are interested in the speedy restoration and growth of transport traffic between East and West. To help counter the coronavirus and restore production chains and the economy, China is implementing a number of incentive measures to ensure stable and uninterrupted rail freight traffic on the China – Europe routes. As part of the support for the Belt and Road initiative, special measures are being taken in China to optimize the business environment and simplify operational procedures, optimal logistics routes are being developed, updated service plans are being proposed to improve the efficiency of railway transportation. The importance of technological innovations and international cooperation in the field of rail freight transportation is emphasized. At the same time, the great importance of the China – Europe railway routes is obvious in terms of mitigating the impact of the coronavirus epidemic and eliminating its consequences regarding the production and supply chains between the countries of Eurasia. Railway routes play a key role as a new transport artery for international cargo transportation. Rail transport is also of paramount importance in the fight against coronavirus in Europe, as trains have already delivered and continue to deliver huge volumes of medical supplies, funds and equipment.
Nevertheless, as already noted, the cumulative and widespread decline in demand for high-value-added products leads to a decrease in the investment activity of Chinese businesses abroad, especially in sectors related to the manufacturing industry, which are targeted by the well-known 55 joint industrial cooperation projects with China. It seems that the government of Kazakhstan needs to approach the implementation of these projects with great attention and care in order to form appropriate regional clusters that can “restart” the country’s economy on a post-industrial and high-tech basis. It is clear that it is not easy to do this in the conditions of the global economic recession, but it is necessary to “retain the investor” and at the same time, with his support, create the necessary “reserve of diversification strength” for the new economy. It should be borne in mind that, according to the Ministry of Commerce of China, over the past six months, Chinese investments in foreign manufacturing industry decreased by 15.6%, to 8.17 billion US dollars. This should be a signal for domestic officials who make decisions on these issues.
Against the background of the trade war between China and the United States, there is a significant decrease in technology transfer, which everywhere hinders the qualitative technological renewal of economies, including the innovative development of the economy of Kazakhstan.
Do we have any reason to be optimistic?
Optimism or pessimism about the assessment of economic development is a bad helper. Calculation and a sober analysis of trends are necessary.
Of course, we can assume a relative growth of bilateral trade between Kazakhstan and China in the post-pandemic era due to gross indicators, but it is necessary to think about expanding the nomenclature, a high-quality investment portfolio, the modern service industry, for example, the information infrastructure of economic interaction, the purity and transparency of operations and market mechanisms of joint industrial projects implemented.
At the same time, the confidence of the whole world in the prospects of China’s development is quite justified. It seems that the recovery of the Chinese economy will continue in the future. This will be driven by rapidly developing new industries and business models, as well as strong state support for macro-policy.
Currently, China is in the best position to solve any emergency situations, remaining an important engine of global growth. The Chinese market is still huge, inclusive and open, where foreign enterprises have every reason to stay and get a good impetus for development.
The country is implementing progressive policies and measures to ensure employment, increase the welfare of the people and improve the business climate for both Chinese and foreign enterprises.
In today’s world, the interests of all countries are very integrated. Mutually beneficial cooperation is a trend of the era. In this regard, bearing in mind that the economy of Kazakhstan itself occupies an insignificant share of the Chinese market, it is necessary to strive for the integrated development of the capacious market of the People’s Republic of China. In this regard, the initiative of the Chinese leadership to cooperate with the countries of the Central Asian region as a whole in the “5+1″format is of great interest.
This may involve mechanisms of regional economic cooperation, which meets the national interests of the Central Asian countries. The formation of a more affluent and capacious common market here, of course, may be of interest to both Chinese investors and regional businessmen connecting the markets of China and Central Asia. However, here it is necessary to avoid mistakes made by other leading external forces cooperating with the region, for example, the US “C5+1” projects or the Eurasian integration on the part of Russia. It is necessary to avoid a situation where geopolitical interests overshadow the economic feasibility of cooperation. Relations should be based on equality, economic pragmatism and joint prosperity.
Author: Aidar Amrebayev
The material is posted with the permission of the author of the publication
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