ST Global Forum Quarterly Briefing: China's economic slowdown is 'a given'

Professor John Wong of the East Asian Institute at the National University of Singapore giving a presentation on China's slowing economy at The Straits Times Global Outlook Forum quarterly briefing on Wednesday (May 11).
Professor John Wong of the East Asian Institute at the National University of Singapore giving a presentation on China's slowing economy at The Straits Times Global Outlook Forum quarterly briefing on Wednesday (May 11).ST PHOTO: JERMYN CHOW

SINGAPORE - China's economic slowdown is "a given" but should not be overstated, economic experts have said.

They pointed out mitigating factors that will slow the slide, such as the slew of economic reforms that Beijing has introduced to balance the economy and prevent excessive speculation.

While investors can expect a "bumpy ride", fears of a hard-landing might have "been over-done", said Mr Teo Joo Wah, chief strategist at OCBC Group's asset management company Lion Global Investors.

He was speaking on Wednesday (May 11) at the second of three quarterly briefings leading up to the annual Global Outlook Forum organised by The Straits Times.

The forum, organised in partnership with OCBC Premier Banking, focused on the challenges China faces over its economic prospects and the tensions with Hong Kong and Taiwan. Also speaking at the forum were Professor John Wong, who is from the National University of Singapore's East Asian Institute, and Ms Li Xueying, The Straits Times' Senior Regional Correspondent.

 

Mr Teo noted that China "does not need such fast growth anymore" because of an ageing population and a workforce that is "on a decline".

He conceded that the Chinese economy is facing structural headwinds from its economic rebalancing, over-capacity and high debt level.

But he pointed out too that the Chinese government is also taking steps to stabilise the economy and that, among other indicators, China's exports are still competitive, making up 18 per cent of world exports.

While he said many people feel that the yuan is overvalued, he is confident that China's central bank will not devalue the currency. That is because doing so will cause neighbouring countries to follow suit and there will be "financial turmoil". This is something the Chinese government would want to avoid as it still wants to ensure social stability.

The main concern, said Mr Teo, is for investors to have "confidence in the Chinese and not pull money out of the economy".

On concerns over the high debt level of the Chinese economy at about 250 per cent of its gross domestic product (GDP), Prof Wong said this was being addressed by economic growth, which while slowing, is still high - at 6.9 per cent last year and targeted at 6.5 per cent this year.

"While it will take some time, they (the Chinese) will be able to digest it," said Prof Wong.

Pointing out that China's economy is linked to its politics, he said that Chinese President Xi Jinping is ensuring there is political stability by strengthening his power base. "I don't see any power struggle. (President) Xi is number one. There is no number two," said Prof Wong.