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A hard landing for China’s economy?

A hard landing for China’s economy?

China’s top economic planner and head of the National Development and Reform Commission (NDRC) Xu Shaoshi asserts that “China will absolutely not experience a hard landing” and that “these predictions of a hard landing are destined to come to nothing”.

The country’s economy is not headed for a hard touchdown, but the instability of the global economy may pose a risk to the efficiency of the country’s growth. China acknowledges that they have faced a tough battle to keep their global economic ranking of no.2 from growing, with an estimated of 6.5% increase in employment and restructuring state-owned enterprises over the next five years.

During the 12-day annual national parliament event, the government outlined the issue of its economy transitioning from an investment and export-focused economy to one based more on services and consumption.

China’s economy increased by only 6.9% in 2015, the slowest it has progressed in a quarter of a century, but still steadily the fastest compared to other major economies.

Capture d’écran 2016-04-01 à 17.48.42

The country has aimed to increase its growth target of 6.5% to 7% for this year, introducing a range that seems rather demanding; whilst seeking flexibility in employment growth and restructuring the “zombie companies” in their various industries.

According to Chinese Prime Minister Li Keqiang, the country’s new objectives are aimed at energy consumption, inflation, and employment opportunities. However, he did not further mention how these objectives would be met. Many investors had hoped that China would propose an assertive resolution for financial spending and prop growth, but instead the draft goal of operating an economic deficit equivalent to 3% GDP (being up from the previous annual target of 2.3%) disappointed many.

China’s massive foreign exchange reserves more than $3 trillion, but a fast decline in assets in the past 18 months with Beijing supporting the country’s currency has shaken some investors. The condition of China’s economy, and Beijing being able to facilitate it, were main talking points at an assembly of 20 financial ministers and significant bankers in Shanghai in February.

Li stated that China has the confidence and support needed to handle difficulties both locally and globally.

“In general, I think China’s economy performance has stayed at a reasonable range (since 2015)” Xu commented and added that the Chinese economy should not be viewed any longer through traditional evaluations. “First, we should look from the angle that the economy has entered the ‘new normal’ period,” he said, in which growth rates have transitioned, and the economy growth engines are progressing towards services from the investment.

Chinese manager

According to Xinhua Official News Agency, China currently has more than 150,000 public enterprises, with the liquidity of more than $100 billion yuan, and the employment of 30 million people. The Chinese government cannot neglect the volatility of the global economy, and must put words into action in order to sustain their economic development.

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