Last year’s decline of growth rate to 7.4 per cent — the lowest in the last 25 years -- has left China unperturbed, with its leaders exuding confidence of transitioning towards an innovation-based economy that would continue to register “medium-to-high” expansion.
Speaking at Davos on Wednesday at the World Economic Forum (WEF), Chinese Prime Minister Li Keqiang said that the economy had entered a “new normal” phase, which analysts say could translate into a sustainable 5-7 per cent growth of the GDP in the coming years.
Mr. Li explained that because of its massive size, a 7 per cent growth today adds $800 billion to the Chinese economy annually, which would have meant 10 per cent growth, had it occurred four years ago.
"Regional or systemic crisis will not happen in China. Nor will there be any hard landing," the Chinese premier observed.
One-child policy
Observers point out that China’s rapid drop in job-seekers since 2011, following the country’s one-child policy partly explains the leadership’s placid response to the growth rate drop. China’s working age population declined by 3.71 million last year—a steeper drop from the 2.44 million fall in 2013.
In turn, China created more than 13 million jobs last year, sending a clear signal to the Communist Party of China (CPC) that growth can be allowed to drop further, without creating social pressures resulting from unemployment.
In Davos, Mr. Li stressed that China would galvanise both new and traditional engines to sustain “new normal” growth. He pointed out that “mass entrepreneurship and innovation” would be encouraged to foster the “new engine of growth”. China would also open up its western and central regions as well as the services sector to the outside world.
Simultaneously, China “will encourage its companies to explore the international market, and work for common development with other countries through greater openness towards each other," he observed.
Net exporter of capital
At a Wednesday media conference in Beijing, a Ministry of Commerce spokesman revealed statistics to show that China had become a net exporter of capital. China's outward direct investment in 2014 had scaled $140 billion; roughly $20 billion more than Foreign Direct Investment (FDI) amount.
This trend is likely to continue as China plans heavy investments in the development of the Silk Road Economic Belt and the 21st century Maritime Silk Route—massive undertakings to connect Asia with Europe, with China as the pole.
