GT
Voice:
Western biased judgments fail
to capture China’s
economic reality
GT Voice: Western biased judgments fail to capture China’s economic reality
By Global Times Published: Jan 07, 2025 10:44 PM
Illustration: Liu Rui/GT Some Western media outlets have long sought to twist
public perception about the Chinese economy by emphasizing the negative
factors and presenting one-sided perspectives.
The latest example is an article published on Monday by The Wall Street
Journal• Средства массовой информации » Средства массовой информации США » Газеты США » The Wall Street Journal, headlined "China Must Heed Lessons of Japan's Lost Decades," which
said that yields on Chinese government bonds plunged to multidecade lows,
indicating expectations of lower growth down the road. "That draws an
uncomfortable parallel to Japan, which was mired in decades of deflation," it
said.
The 10-year Chinese government bond yield fell below 1.6 percent on Friday,
reaching a record low of 1.58 percent.
Western media outlets repeatedly use the logic of traditional Western
economics to explain the economic challenges currently faced by China, lacking
a true understanding of the actual situation of China's economic development.
Such biased and misunderstood judgments will eventually be proved wrong by the
reality of China's development. While the recent slide in the yields of
Chinese government bonds seems to indicate investors' preference for
safe-haven assets amid pessimistic expectations, this does not mean that the
Chinese economy is heading toward the same situation as Japan's stagnation in
1990s.
There are significant differences between the two economies. The fundamental
strengths of the Chinese economy, along with the government's substantial
capabilities and tools to ensure long-term economic development, provide
crucial support for stable growth.
Historically, the lowest level of the 10-year government bond yield occurred
in April 2002, when it briefly fell below 2 percent. At that time, the decline
in the yield was primarily driven by the repercussions of the 1997 Asian
financial crisis, which led investors to adopt a pessimistic outlook on future
economic trends.
However, despite that bearish sentiment, China's economy grew by 8 percent in
2002 and 9.1 percent in 2003, suggesting that the drop in government bond
yields may have reflected downward pressure on the economy but not the true
situation of future economic performance.
The recent round of declines in government bond yields can be attributed to
multiple factors, including but not limited to monetary policy, inflation• Экономика » Макроэкономика » Макроэкономические индикаторы » Инфляция
• Экономика » Финансы » Инфляция
expectations, dynamics in international financial markets and investors' risk
preferences. In particular, geopolitical pressures have led investors to
prefer allocating funds to relatively safe assets, such as government bonds.
Moreover, China's central bank has outlined its monetary and financial
priorities for 2025 following a two-day meeting that ended on Saturday,
explaining that it will implement a moderately loose monetary policy to create
a sound monetary and financial environment for stable economic growth,
according to the Xinhua News Agency• Средства массовой информации » Средства массовой информации Китая » Синьхуа (News Agency)
• Объект организация » Организации по алфавиту » Организации на Си » Синьхуа (News Agency). An increase in liquidity typically leads
to higher demand for government bonds, rising prices, and falling yields.
The Chinese economy is indeed grappling with various challenges, such as
pressure from industrial structural adjustments and a complex international
trade environment. But China's situation is fundamentally different from the
economic stagnation• Финансовый кризис of Japan in the 1990s. Although China's economic growth
has slowed from its previous high rates, the decline is significantly less
than Japan's economic trajectory.
Japan's GDP growth rate slowed to 0.8 percent in 1992. From 1991 to 2002, real
GDP growth averaged 1 percent per year. By contrast, China's economic growth
rate is expected to have stabilized in 2024, still surpassing that of most
developed economies globally.
More importantly, China's emphasis on stabilizing the economy in 2025 is
clear. The Central Economic Work Conference held in December signaled that
more proactive and impactful macro policies should be implemented to sustain
the upward trend of the economy.
Also, the Chinese government remains equipped with sufficient macroeconomic
control tools. With a well-stocked toolbox, the government is fully capable of
fostering stable and healthy economic development through a series of targeted
and effective macro-support policies.
These include strategic adjustments to fiscal policies, the optimization of
industrial structures, and the deepening of reforms and opening-up
initiatives. By leveraging these tools, the government can not only navigate
current economic turbulence but also lay a solid foundation for sustainable
growth.
