China has a message for the Davos crowd: Fear about an economic slowdown is overblown.In a speech at the World Economic Forum, Vice President Wang Qishan said that growth remains substantial, and that it’s important for China to focus on the long term.
“There will be a lot of uncertainties in 2019, but something that is certain is that China’s growth will continue and will be sustainable,” he said Wednesday.
Earlier this week, China reported that its economy grew 6.6% in 2018, the slowest pace in almost three decades.
Activity has been hit by government efforts to rein in high levels of debt with the aim of putting the vast economy on more stable footing. Momentum has also been blunted by the trade war with the United States, which has led to tariffs on hundreds of billions of dollars in Chinese exports.
Wang, for his part, took a glass-half-full view of the data.
“I think [6.6%] is a pretty significant number,” he said. “Not low. At all.”
Wang said that the Communist Party is “trying to remind people that speed does matter, but what really matters for the time being is the quality and efficiency” of development.
Chinese officials have echoed this sanguine take throughout the week.
Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at a panel on Tuesday that growth as low as 6% would not be “a disaster.”
Still, concerns about China’s slowdown and what it means for global growth have rattled markets.
Chen Xingdong, chief China economist at BNP Paribas, said Wednesday that Beijing faces the most difficult economic situation since the global financial crisis.
“Growth is slowing down quite dramatically,” Chen told reporters. “The magnitude of the slowdown has been intensifying.”
China has been working to support growth through a combination of looser monetary policy and fiscal stimulus such as tax cuts for small businesses.
Bright spots do remain. Retail sales in China are set to reach more than $5.6 trillion this year, about $100 billion more than in the United States, according to a report published Wednesday by research firm eMarketer.
But the spectre of tougher trade penalties looms.
China and the United States are racing to cut a deal on trade before March 1, when tariffs on $200 billion in Chinese goods will otherwise rise to 25% from 10%. Negotiations with top officials are scheduled later this month in Washington, although an invitation by Beijing to hold preliminary talks this week was rejected by the White House.
BNP Paribas sees a 60% to 70% chance that a US-China trade deal gets done. The alternative is grim, and would “cause a massive increase in job losses,” Chen said.
Wang appeared to take a jab at the Trump administration and to offer an olive branch at the same time.
“Shifting blame for one’s own problems onto others will not resolve the problems,” he said in prepared remarks.
Later, asked about the US-China relationship during a question-and-answer session with the WEF chairman, Wang said that the two economies rely on each other, so “there has to be mutual benefit and win-win.”