Some foreign media and scholars have recently claimed that the economic slowdown in China has affected the world economy. Their argument, however, has been proved groundless by economic data.
China recorded a 6.9-percent GDP growth in 2015, which garnered applause throughout the world. But some observers simply refer to that figure as a "25-year low" without offering deeper analysis. Such comments are superficial.
First of all, as China's economic size expands, the country's GDP growth is expected to slow down at an acceptable pace. This trend accords with that of many countries and regions around the world.
Second, even though China's economic growth has slowed down, it is still one of the highest in the world. According to available figures, among major world economies, China recorded a GDP growth second only to India's 7.6 percent, which was much higher than the average growth of 2 percent in developed economies including the United States, the United Kingdom, Germany and France. The International Monetary Fund (IMF) forecast that world economic growth would reach 3.1 percent in 2015--China's rate more than doubled that number.
Lastly, as the Chinese proportion increases throughout the global economy, China still contributes significantly to world economic growth, even though its growth rate has slowed down slightly. According to the IMF's forecast in 2015, China had still contributed 30 percent to world economic growth. This is not only higher than the United States' contribution--which is the world's largest economy--but also greater than that of India.
When the world economy slowed down in 2015, the international commodities market was experiencing an even worse situation, dealing with excessive supply and prices continuing to decline.
Some media outlets and research institutions pinned the blame on China, saying that its economic slowdown had curbed demand on commodities and damaged prices.
Actually, there were multiple factors that led to the fall in prices in the international commodities market.
Take oil prices for example. According to the IMF's estimation, the average prices of UK Brent, Dubai Fateh and West Texas Intermediate crude oil fell by 47.1 percent in 2015. However, China's crude oil imports in 2015 rose by 8.8 percent. Also in the same year, China's imports of iron ore and concentrates grew by 2.2 percent, and those of mineral and chemical fertilizers as well as natural and synthetic rubber went up by 16.6 percent and 15.3 percent respectively. China's imports of major agricultural products also increased.
Without the demand from China, the decline in prices would have definitely been more serious. It is therefore ridiculous to point one's finger at China for this issue.
In addition, a large number of Chinese tourists have spent a record-breaking amount of money in foreign countries, helping to stabilize the global market. For example, 6.11 million Chinese visited South Korea in 2015, accounting for 40 percent of the total foreign visitors to the country. Chinese tourists spent $2,170 on average in South Korea, contributing $22 billion, or 2.6 percent, to the country's GDP.
China's outbound investment is also an important source of world economic growth.
According to figures from the United Nations Conference on Trade and Development, global flows of foreign direct investment (FDI) jumped 36 percent in 2015. However, developing economies saw their FDI growing only 5 percent, and most of the investment went to developing Asia, with inflows to other developing countries even declining by more than 10 percent.
Against this backdrop, China's outbound investment, especially to developing countries, has grown rapidly. In 2015 the country invested a record high of $118.02 billion abroad, up by 14.7 percent, much of which was parked in developing countries.
In 2015 Chinese companies made a number of direct investments amounting to $14.82 billion to 49 countries along the Silk Road Economic Belt and the 21st Century Maritime Silk Road, 18.2 percent higher than 2014's figure. Most of those countries are developing economies. While many developing countries are facing outflows of foreign investment, growing direct investment from China has boosted their economic growth tremendously.
While most of major world currencies are currently depreciating sharply against the U.S. dollar, the yuan hasn't depreciated as drastically, which has helped stabilize the global financial market.
In 2015, the euro and Japanese yen devalued by 16.5 percent and 12.5 percent respectively against the U.S. dollar. India, whose economic growth was faster than China, saw its rupee depreciate by 3.9 percent against the U.S. dollar. Since most other currencies are depreciating against the U.S. dollar while the yuan remains relatively stable, the takeaway is that the real effective exchange rate of the yuan is appreciating significantly. According to the Bank of International Settlements, the yuan's monthly average real effective exchange rate index rose by 9.7 percent in 2015.
Under such circumstances, even though China's exports have declined, it didn't choose to devalue its currency. Instead, China chose to assume its responsibilities as a major economic player.
It is easy to see that China has not stymied world economic growth. On the contrary, it has made significant contributions to its development and stability.
This is an edited excerpt of an article written by Zhang Yongjun, Deputy Director of the Economic Research Department of China Center for International Economic Exchange
Copyedited by Bryan Michael Galvan
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