Opinion / 4 September 2019, 11:11am / H.E. Ambassador Lin Songtian
On August 19, Mr Kevin Cousins, head of research at PSG Asset Management, published a long editorial on Business Day to justify the company’s investment in Japan, which is beyond reproach in itself.
However, the article went so far as to distort the facts to smear China’s economic development and investment prospect, which will only mislead readers and investors.
Frankly speaking, I was shocked by this article. I cannot understand why in today’s information age, there are still such economic researcher who ignores the facts and turn a blind eye to the trend of world development.
It seems that Mr Cousins is still living in the Cold War era, and he has never been to Asia or logged on the website to learn about the world. We firmly believe to Seek Truth From Facts, as facts and figures can speak volumes about China’s economy.
As an economic policy analyst, I think Mr Cousins could understand figures better. Over the past four decades, China has been committed to reform and opening up and achieved an average annual GDP growth rate of 9.5%. In 2010, China surpassed Japan and became the second largest economy in the world.
In 2014, China’s GDP reached $10.48 trillion, twice that of Japan. In 2018, China’s GDP totaled $13.7 trillion, nearly three times that of Japan. Now China has become the largest manufacturer, the largest trader in goods, and the largest holder of foreign exchange reserves in the world.
China now is the largest trading partner of more than 100 countries around the globe. In recent years, the foreign investment in China and China’s outbound investment have both exceeded $130 billion every year. Since 2006, China has contributed about 30% of world economic growth, more than all developed countries combined.
Over the past 40 years, China has created a miracle in the history of human development, lifting nearly 800 million Chinese people out of poverty. By the end of 2020, all of China’s 1.4 billion people will be lifted out of extreme poverty, which will be a great feat for world human rights cause and no one can achieve in the world.
Domestic consumption has now become the main driving forces for China’s economic growth. In 2018, domestic consumption contributed over 76% of China’s economic growth.
China’s per capita GDP is nearly $10,000. With 1.4 billion Chinese people and 400-million middle income population, China will soon become the world’s largest consumer market. In the next 15 years, China’s imports of goods and services will exceed $30 trillion and $10 trillion respectively, creating a huge market for all other countries around the world.
Now China has been pursuing high-quality and innovative development instead of high-speed growth. China’s annual output in scientific and technological innovation has exceeded 2.1% of its GDP, more than the average level of EU, and the total output is only second to that of the USA.
China has become a pioneer in digital economy, internet economy and sharing economy as well as one of the leading countries in the Fourth Industrial Revolution. The year 2018 marks the first year of China’s 5G commercial operation, and the application of 5G has now been available in 40 major cities in China and is expected to cover the whole country by the end of 2020, which will enable China’s investment enterprises to develop with higher efficiency.
Green development has become a prerequisite for the sustainable development of China’s economy. In the past, China’s rapid and extensive economic growth has caused serious damage to the ecological environment, for which China paid a heavy price.
In recent years, President Xi Jinping has made ecological conservation a basic state policy of China and stressed that “clean water and green mountains are as precious as golden mountains.” China is making every effort to resolutely prevent and control environmental pollution, so as to make skies blue, waters clear and mountains green again.
According to a report by the UN Environment Programme, from 2013 to 2017, the average annual PM2.5 concentration in Beijing’s air dropped by 35%, while the PM2.5 concentration in the Beijing-Tianjin-Hebei region dropped by 25%. Opening wider to the outside world has given China’s economy greater vitality.
China recently released a revised negative list for foreign investment access, which reduced the number of items on the list from 48 to 40, representing a decrease of 16.7%.
Meanwhile, a host of new opening-up measures have been introduced in such fields of transportation, infrastructure, telecommunications, agriculture, service, mining and manufacturing, which has won widespread acclaim from the international community.
The claim that China manipulates its currency is sheer nonsense. China implements a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. According to the data released by the Bank for International Settlements, from the beginning of 2005 to June 2019, the nominal effective exchange rate of RMB appreciated by 38% and the real effective exchange rate appreciated by 47%.
Since August this year, the RMB has depreciated against the US dollar, mainly because the USA unilaterally imposed additional tariffs on $300 billion worth of Chinese goods, which has caused fluctuations in market supply and demand as well as international currency markets.
A recent report by IMF explicitly said that “while the RMB has depreciated against the US dollar, it has not been significantly overvalued or undervalued.”
As projected by OECD and PWC, by 2025, the mid-income population of China and India will account for 30% of the world’s total, and the consumption in emerging markets will account for half of the world’s total.
In 2035, the economic aggregate of developing countries will account for 60% of that of the whole world, up from the current level of 40%. This is the general trend of world development.
As for which one of China and Japan is a more favorable destination for investment, I believe researchers like Mr Cousins cannot make a wise choice. In the past 40 years, China has used more than $2 trillion foreign direct investment, making it one of the world’s top destinations for investment.
According to the 2019 World Investment Report released by the UN Conference on Trade and Development, global FDI fell for the third consecutive year in 2018, but the FDI inflow to China increased by nearly 4% and China attracts more than $130 billion FDI annually.
Even against the backdrop of escalating trade frictions between China and the USA, investment by US companies in China is still growing rapidly. In 2018, the US direct investment in China reached $3.45 billion, up by 7.7%.
In the first quarter of 2019, the US invested $1.06 billion in China, up by 71.3% year on year. By contrast, the US only invested $1.22 billion in Japan in 2018. Bridgewater, the world’s largest hedge fund, recently called on global investors to buy Chinese assets.
Such US companies as McKinsey & Company and Boston Consulting Group and other world-renowned investors all believe that “China remains the biggest growth opportunity in the world” and “China is the right investment direction and definitely worth it”.
The world has changed! China has changed! If one still clings to the Cold War mentality and harbors political prejudice or only learns about the world from CNN and BBC every day, he is bound to be ignorant of the world.
It is my sincere hope that Mr Cousins can save enough money to travel to China to update his knowledge and ideas so as to avoid misleading investors and readers.