By Cole Lennon
China’s economy still packs a punch. Despite this self-evident fact, The Economist writer Simon Rabinovitch predicts an era in which China’s recent slowdown will get much more unpleasant as the Chinese economy takes harsher hits to economic growth. Rabinovitch’s argument falls flat, as it neglects to note more recently aggressive monetary policy, plans for more growth-enhancing fiscal policy, and a lack of perspective on how China relates to other economies. China’s economy is not just staving off decline, it is building a better future compared to the rest of the world.
The Chinese government plans to use monetary and fiscal policy to revive massive economic growth. The People’s Bank of China (PBOC) recently has been cutting interest rates and plans to cut even more to evade deflation. Inflation has risen from 0.8% in early 2015 to 1.4% now, so its plan looks promising. Fiscal policy should also provide more gains. Chinese officials recently cited $18 billion of previously unallocated spending, as well as an additional $258 billion in deficit spending next year. It is doing so to boost growth from the current rate of 7.4% and overall demand. Economist Alexander Wolf cites low demand as one of China’s biggest problems, and these measures are expected to help solve it. China’s economy is also favorable to many economies worldwide, as its 7.4% growth is higher than the average for every continent on Earth. It ranks in the top 20 among countries and only falls behind double-digit growth in much smaller economies. China’s stature still leaves room for optimism.
Changes in China’s economy are ultimately a sign that economic progress is here to stay. China’s more stimulative monetary policy will ensure that growth can stay above an already high percent. Its fiscal policy will also support high growth, as it has already pumped hundreds of billions of dollars into China’s $10 trillion economy. The Chinese economy’s 7.4% growth rate is also impressive when considering the massive struggles advanced economies in Europe have faced to achieve even 1% growth. China is primed for a second round knockout.