China says its model reflects the needs of a country still converging with advanced economies<\/p>\n
[SINGAPORE\/BEIJING] China is energetically defending its economic policy mix that favours advanced industries over consumption, adopting a posture analysts see as demonstrating increasing confidence ahead of looming trade talks with Europe and the United States.<\/p>\n
President Xi Jinping and US counterpart Donald Trump plan more face-to-face meetings this year, while Brussels has set an October deadline for Beijing to settle disputes as worries grow over China\u2019s trillion-dollar-plus trade surplus.<\/p>\n
Western countries frame China\u2019s policies as mercantilist and opposing global trade rules, saying its priority for producers over households pushes cheaper goods into global markets, hollowing out industry in nations seeking more balanced growth.<\/p>\n
But a meeting of top Communist Party leaders signalled policy continuity on Thursday (Jul 30), calling for targeted support rather than the consumer-focused stimulus and structural changes long urged by China\u2019s trading partners and many economists.<\/p>\n
Days earlier, the commerce ministry accused the West of protectionism in a position paper on \u201cso-called industrial overcapacity\u201d that rejected the notion as rooted in \u201clogical flaws\u201d and \u201culterior motives\u201d.<\/p>\n
The ruling Communist Party\u2019s flagship theoretical journal, Qiushi, also defended China\u2019s low consumption in July, as a \u201chistorically justified\u201d outcome of the investment-led, catch-up development model.<\/p>\n
Such messages stop short of telling the West that China will not change course, said Xu Tianchen, a senior economist at the Economist Intelligence Unit, but send two posturing signals.<\/p>\n
\u201cThe first is about hoping others understand where it comes from. A better mutual understanding helps in negotiations,\u201d Xu said. \u201cThe second is about drawing a red line.\u201d<\/p>\n
The commerce ministry paper \u201cmade clear that China doesn\u2019t accept discriminatory measures against its firms and products,\u201d he added.<\/p>\n
China tries to reverse \u2018shock 2.0\u2019 narrative<\/p>\n
China says its model reflects the needs of a country still converging with advanced economies. Its products are not only cheaper, but increasingly better, while its tech and science investments can benefit the entire world.<\/p>\n
This month, Premier Li Qiang countered warnings of a \u201cChina shock 2.0\u201d, or a scenario in which Chinese firms crowd out Western competitors in advanced manufacturing, portraying it as \u201cChina opportunity 2.0\u201d for the global economy.<\/p>\n
This is a \u201cnarrative that is falling flat in countries at the receiving end of those exports\u201d, said Eswar Prasad, a professor of trade policy at Cornell University and a former China director at the International Monetary Fund.<\/p>\n
\u201cChina\u2019s heavy dependence on exports to power its own growth in light of weak domestic demand is going to make it difficult to argue that Chinese exports are a gift to consumers worldwide.\u201d<\/p>\n
Washington\u2019s effort to boost pressure on China through tariffs of more than 100 per cent last year floundered as Beijing used its dominant position in production of rare earths, key for a wide range of global industries, to regain strategic ground.<\/p>\n
Now the European Union, whose trade deficit with China \u2060averaged US$1 billion a \u200bday last year, is pursuing its own industrial and domestic procurement policies to defend its market.<\/p>\n
This month, German Chancellor Friedrich Merz criticised Beijing for keeping its currency undervalued.<\/p>\n
But the latest statements from China suggest Beijing\u2019s confidence is growing that it can soften trade disputes without making significant concessions.<\/p>\n
\u201cThe US tariff episode appears to have supplied a template of managed engagement that Beijing is also applying to Europe \u2014essentially buying time,\u201d said Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis.<\/p>\n
\u201cBeijing\u2019s messaging on its economic model does come across as more confident and tightly framed than a year or two ago,\u201d she added.<\/p>\n
Moving slowly against fast \u2018evidence\u2019<\/p>\n
To be sure, Beijing has slowed investment this year, primarily by tightening scrutiny on local government spending, which economists blame for driving overcapacity in manufacturing and infrastructure.<\/p>\n
Officials publicly recognise a supply-demand \u201ccontradiction\u201d and pledge to end deflationary price wars among producers battling for market share at the expense of profits.<\/p>\n
They often promise to boost consumer demand, even without major structural reform plans.<\/p>\n
\u201cHistorical justification does not mean long-term justification\u201d of weak consumption, the Qiushi article said, adding that a change in the model was \u201cnecessary\u201d.<\/p>\n
Analysts say this means China recognises imbalances but wants to move carefully, fearing disruptive changes.<\/p>\n
But a growing body of international research warns Beijing\u2019s policies threaten both the global economy and its own.<\/p>\n
For nearly 60 per cent of Chinese firms, their \u201cmarket share gains can be explained by subsidies received\u201d, the Organisation for Economic Cooperation and Development said in a recent report.<\/p>\n
A Bank of Italy paper estimated that domestic factors, such as weak consumption and overcapacity, have driven about 75 per cent of Chinese export growth.<\/p>\n
A McKinsey Global Institute report said China is adding three times more productive assets each year than Europe and the United States combined, while its capital returns are roughly 40 per cent lower.<\/p>\n
\u201cChinese arguments are more frequent and formal now because the evidence of systemic domestic economic problems leading to spillovers on the rest of the world is mounting even faster,\u201d said Daniel Rosen, co-founder of researcher Rhodium Group. REUTERS<\/p>\n","protected":false},"excerpt":{"rendered":"China says its model reflects the needs of a country still converging with advanced economies [SINGAPORE\/BEIJING] China is…\n","protected":false},"author":2,"featured_media":580965,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,114,60450,113,5148,61,1955,60,115],"class_list":["post-580964","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-china","tag-china-economy","tag-economy","tag-european-union","tag-ie","tag-international-trade","tag-ireland","tag-united-states"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/580964","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=580964"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/580964\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/580965"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=580964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=580964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=580964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}