GDP rises at estimated 7% in 2015, 13 million jobs were added, major economic targets were achieved

[TaiShang]

GDP rises at estimated 7% in 2015
By Xie Jun Source:Global Times Published: 2016-1-13


China's Gross Domestic Product (GDP) grew by an estimated 7 percent in 2015, roughly in line with government targets, China's top economic planning agency said on Tuesday, but warned that 2016 will be a difficult year for the country's economy.

A total of 13 million new jobs were added, and major economic targets were achieved with the launch of a number of government measures, Li Pumin, secretary-general of the National Development and Reform Commission (NDRC), said at a press conference on Tuesday.

Li's comments come at a time when turbulent Chinese stock markets and a sharp decline in the yuan's exchange rate have sparked concerns over a potential "hard landing."

The 7 percent GDP growth, though down from the 7.3 growth in 2014, is slightly higher than estimates of some international financial institutions, such as 6.8 percent by Goldman Sachs and Moody's, and 6.9 percent by Standard & Poor's.

Lian Ping, chief economist of the Bank of Communications, told the Global Times on Tuesday that it's highly probable that China's GDP will be around 7 percent for 2015.

Lian said the fourth quarter GDP is likely to reach 7 percent, as economic data released so far shows that exports, infrastructure investment and consumption have all rebounded.

GDP growth in the first three quarters was 7, 7 and 6.9 percent, respectively.

Difficult 2016

Li said China approved 280 fixed asset investment projects worth 2.52 trillion yuan ($383 billion) in 2015, with 32 projects worth 515.1 billion yuan approved in December alone.

However, he noted that for 2016, the global economic situation will worsen, and the negative effects of China's economy as well as the "long-accumulated problems" might manifest itself to a greater extent this year.

Wang Tao, chief China economist at UBS Securities, also said that 2016 will be a "difficult year" in terms of economic development, and GDP growth will slow down further to 6.2 percent for the whole year.

That's because the process of solving the oversupply in the real estate sector will continue in 2016, Wang said at the UBS press conference in Shanghai on Tuesday.

'Stable' yuanRecent fluctuations in the yuan's exchange rate have also heightened concerns over a rapid slowdown in China's economy, according to overseas media.

The central parity rate of the yuan weakened by 2 basis points to 6.5628 against the US dollar on Tuesday.

But Wang told the Global Times on Tuesday that while weaker against the US dollar, the yuan has been doing fairly well against other currencies.

Therefore, recent currency moves have been "more about dollar strength than yuan weakness," she noted, stressing that currency fluctuations are normal.

The government may also roll out more fiscal and monetary policy adjustments to boost growth in 2016. These measures include two interest rates cuts, several cuts in the bank's reserve requirement, releasing its grip on enterprise bond issuance and increasing infrastructure projects, Wang said.

Xu Hongcai, director of the department of information of the China Center for International Economic Exchanges, predicted economic growth will continue to slide in 2016.

"A 6.8 percent growth is out of question," he told the Global Times on Tuesday.

Lian said that it's very hard to predict the exact GDP growth in 2016 because of too many uncertainties in the world economy, the pace of changes in US monetary policy, as well as activity in China's real estate market.

"If demand in the real estate market rises in 2016, GDP growth might approach or even hit 7 percent. If not, a growth above 6.5 percent is to be expected," Lian said.

@Shotgunner51 , @Keel , @Martian2 , @Chinese-Dragon , @AndrewJin , @cirr , @oprih , @Economic superpower et al.

 

[Chinese-Dragon]

Hmm, better than expected.

Let's keep adding those trillions every year.

 

[TaiShang]

Priorities necessary as China enters crucial period

At the beginning of China's 13th Five-Year Plan (2016-20) period, the country is in a critical and complicated economic situation, internally and externally. As the US economy gradually stabilizes, the eurozone and Japan are having a hard time adjusting, and the low oil prices and US interest rate hike are putting pressure on emerging economies that rely heavily on energy and resources. As the Chinese economy is adjusting its economic growth and continuing to optimize its economic structure, there are certain fields people should pay special attention to in 2016.

The first aspect lies in dissolving overcapacity, as has been emphasized as the first priority in China's structural reforms of 2016 at the Central Economic Work Conference last month. For instance in the steel industry, the overall industry capacity is at 1.2 billion tons, while domestic steel demand and steel exports are respectively at around 700 million tons and 100 million tons, so there are 400 million tons of steel capacity to be eliminated. Once this process is completed, steel prices will be increased or even doubled, and the private sector may be able to invest in new capacity that is more environmentally friendly, serving the economy and the people better.

The second aspect focuses on destocking in the property market. One view is that destocking in large cities won't be an issue, and that first-tier cities such as Beijing, Shanghai and Shenzhen will soon see a new investment boom, while lower-tier cities are faced with bigger challenges in destocking.

Another view relates to the average destocking speed between commercial property and residential property, which are respectively at 18 months and six months, currently. For commercial properties, by mid-2016, the speed of destocking will be reduced to 12 months and, according to past experience, once the destocking period is reduced to 12 months, enthusiasm from property developers to acquire land will resume.

It is expected that June 2016 will be a turning point, during which real estate investment - which plays a big role in fixed-assets investment - should return to a growth level of 4 percent or 5 percent, compared with roughly 1 percent by the end of last year. A 5 percent growth rate in real estate investment should sustain China's macro economy and allow fixed-assets investment growth to reach around 10 percent.

The third aspect is the Chinese currency, the yuan. It should be noted that China's foreign reserves declined by $500 billion in 2015, from $3.8 trillion down to $3.3 trillion. The reason for this is that about $650 billion has left China through the capital account - among which more than $100 billion was foreign direct investment from China, while the other $500 billion can't be wholly accounted for, and such capital could be used for overseas investment or speculation. The amount of such capital is worrisome, and the government and the public should attach great importance to this issue.

On the yuan rate, which the authorities say has remained stable against a broad currency basket, market concerns that the Chinese government is allowing the yuan to depreciate to maintain economic growth are completely wrong.

China should also tightly control its capital account. For those categories that have been opened under China's capital account, there is no turning back. But for categories not committed, such as institutions' overseas stock investment, relevant authorities should be watchful and avoid unreasonable arbitrage, especially for large domestic institutions like State-owned enterprises that have overseas branches.

The fourth aspect lies in maintaining financial stability during this round of economic restructuring. The real economy is now in better shape than in the past. The finance sector has never been so active or had so many market participants. Management of financial adjustments should be among the top priorities for the relevant authorities, and investors' sentiment should be highly valued and their expectations should be well managed. The financial market this year may still experience some volatility, but considering the stability of China's economic fundamentals, there are not likely to be major problems in the finance sector, and investors should remain patient and firm.

The fifth is to focus on the potential consumption boost from China's two-child policy, under which China in the second half is expected to have 2 million to 2.5 million second children among households that have better economic conditions and hold greater desire for a second child. With a second child, the consumption of such families will be higher, and this is expected to drive up GDP by 0.2 percent.

2016, especially the first half, will be a critical period for economic structural adjustment. If fixed-assets investment in the first six months is gradually stabilized and goes up in the second half, 2016 will set a good foundation for the overall economic development of the 13th Five-Year Plan.

The article is based on a speech at a recent forum in Beijing by Li Daokui, director of the Center for China in the World Economy (CCWE) at the School of Economics and Management of Tsinghua University.

 

[AndrewJin]

Hmm, better than expected.

Let's keep adding those trillions every year.

Around 0.7 trillion US dollars?

 

[Chinese-Dragon]

Around 0.7 trillion US dollars?

Nominal growth rate = Real growth rate + Inflation rate.

So a lot more than that.

 

[CHD]

@Chinese-Dragon @TaiShang whats the timeline of china over-taking US economically?

 

[Chinese-Dragon]

@Chinese-Dragon @TaiShang whats the timeline of china over-taking US economically?

About a decade in terms of Nominal GDP (based on exchange rates) and already in terms of GDP (PPP).

It could go faster or slower depending on how the currencies move, since the Chinese Yuan has recently been accepted by the IMF as an official reserve currency.

But the real answer is, wait and see. Can't know for sure until the day it happens.

 

[TaiShang]

Nominal growth rate = Real growth rate + Inflation rate.

So a lot more than that.

There is also the upgrade of the GDP calculation method which China has yet to complete, as @Martian2 mentioned.

Martian calculated that the new method adds another trillion dollars to China's economy.

@Chinese-Dragon @TaiShang whats the timeline of china over-taking US economically?

There is no definite timeline, my friend, but various estimations. Most people put it at around 2020-22. But that's, from our point of view, not really important. Not being the number 1 also has its own privileges.

There is still a very critical half a decade that China needs to go through and this five years will have lots of surprises, ups and downs. It is all about the management and strategic mind of the government to weather through the very painstaking transition. Nonetheless, it has to be done.

I am happy about the fact that we have a very smart, historical, pragmatist and long-minded President at the highest office during that transition.

@Shotgunner51 , @tranquilium , @Keel , @Economic superpower

 

[CHD]

There is also the upgrade of the GDP calculation method which China has yet to complete, as @Martian2 mentioned.

Martian calculated that the new method adds another trillion dollars to China's economy.



There is no definite timeline, my friend, but various estimations. Most people put it at around 2020-22. But that's, from our point of view, not really important. Not being the number 1 also has its own privileges.

There is still a very critical half a decade that China needs to go through and this five years will have lots of surprises, ups and downs. It is all about the management and strategic mind of the government to weather through the very painstaking transition. Nonetheless, it has to be done.

I am happy about the fact that we have a very smart, historical, pragmatist and long-minded President at the highest office during that transition.

@Shotgunner51 , @tranquilium , @Keel , @Economic superpower

How is Xi jingping Performing in compare to others and how much time is left in his tenure?

 

[Martian2]

Nominal GDP is based on three factors.

1. Real economic growth
2. Inflation rate
3. Currency appreciation

China is currently using the archaic SNA 1993 accounting method. Everybody else is using the SNA 2008. There is a 200-page study by an American think-tank that shows China's SNA 2008 nominal GDP would be $1 trillion higher than the current figure.

China had announced its currency will be free-floating by the year 2020. In four more years, China can no longer control its exchange rate. China has a merchandise trade surplus of $600 billion in 2015. With oil dropping to $30 per barrel, China's trade surplus this year should be around $750 billion. By 2020, the pressure would be enormous for a massive appreciation in China's currency due to the accumulated trade surpluses.

In conclusion, China's nominal GDP could overtake the US as early as 2020 (due to a market-based currency valuation and adoption of SNA 2008 accounting method). At the latest, I would say about 2025.

How is Xi jingping Performing in compare to others and how much time is left in his tenure?

7 years left for Xi Jinping.

Economic performance is based on the metric that you choose.

In terms of absolute economic growth, Xi Jinping is presiding over the largest economic growth in China's history at $1 trillion nominal GDP growth per year.

In percentage terms, Xi Jinping is presiding over the smallest percentage growth due to China's existing massive nominal GDP economic base.

It depends on your frame of reference. Do you care about absolute economic growth? Or do you care about the statistical percentage growth? Xi Jinping has to grow off of a much larger GDP base ($11.4 trillion). Thus, Xi Jinping will be stuck with a lower percentage figure. This large-base statistical effect applies to all future Chinese presidents.

 

[AndrewJin]

Nominal GDP is based on three factors.

1. Real economic growth
2. Inflation rate
3. Currency appreciation

China is currently using the archaic SNA 1993 accounting method. Everybody else is using the SNA 2008. There is a 200-page study by an American think-tank that shows China's SNA 2008 nominal GDP would be $1 trillion higher than the current figure.

China had announced its currency will be free-floating by the year 2020. In four more years, China can no longer control its exchange rate. China has a merchandise trade surplus of $600 billion in 2015. With oil dropping to $30 per barrel, China's trade surplus this year should be around $750 billion. By 2020, the pressure would be enormous for a massive appreciation in China's currency.

In conclusion, China's nominal GDP could overtake the US as early as 2020 (due to a market-based currency valuation and adoption of SNA 2008 accounting method). At the latest, I would say about 2025.


7 years left for Xi Jinping.

Economic performance is based on the metric that you choose.

In terms of absolute economic growth, Xi Jinping is presiding over the largest economic growth in China's history at $1 trillion nominal GDP per year.

In percentage terms, Xi Jinping is presiding over the smallest percentage growth due to China's massive nominal GDP economy.

It depends on your frame of reference. Do you care about absolute economic growth? Or do you care about the statistical percentage growth? Xi Jinping has to grow off of a much larger GDP base. Thus, Xi Jinping will be stuck with a lower percentage figure. This large-base statistical effect applies to all future Chinese presidents.

 

[TaiShang]

How is Xi jingping Performing in compare to others and how much time is left in his tenure?

There is no comparison in absolute terms. That's probably hard to understand for non-Chinese.

Different times, different measures, my friend. Territoriality and temporality are two mainstays of China's public and foreign governance. In that regard, each administration of China has done their part according to the calls and necessities of their time as well as according to the larger national plan, in economic terms, the five-year plans of China.

Development is always in stages, one can never leapfrog through indigenous development. China has taken the course of indigenous development, hence, it was incremental albeit steady. The task of previous administrations were therefore slightly different from the task of Mr. Xi. Today, the key term is transition (and high-end growth) from heavy reliance on manufacturing and export to manufacturing-services balance and internal consumption.

On that front, Mr Xi and his team are doing an excellent job; that's transitioning the economy while still maintaining economic stability.

Mr. Xi still has a good 7-8 years in office.

 

[liall]

Nominal GDP is based on three factors.

1. Real economic growth
2. Inflation rate
3. Currency appreciation

China is currently using the archaic SNA 1993 accounting method. Everybody else is using the SNA 2008. There is a 200-page study by an American think-tank that shows China's SNA 2008 nominal GDP would be $1 trillion higher than the current figure.

China had announced its currency will be free-floating by the year 2020. In four more years, China can no longer control its exchange rate. China has a merchandise trade surplus of $600 billion in 2015. With oil dropping to $30 per barrel, China's trade surplus this year should be around $750 billion. By 2020, the pressure would be enormous for a massive appreciation in China's currency due to the accumulated trade surpluses.

In conclusion, China's nominal GDP could overtake the US as early as 2020 (due to a market-based currency valuation and adoption of SNA 2008 accounting method). At the latest, I would say about 2025.


7 years left for Xi Jinping.

Economic performance is based on the metric that you choose.

In terms of absolute economic growth, Xi Jinping is presiding over the largest economic growth in China's history at $1 trillion nominal GDP growth per year.

In percentage terms, Xi Jinping is presiding over the smallest percentage growth due to China's existing massive nominal GDP economic base.

It depends on your frame of reference. Do you care about absolute economic growth? Or do you care about the statistical percentage growth? Xi Jinping has to grow off of a much larger GDP base ($11.4 trillion). Thus, Xi Jinping will be stuck with a lower percentage figure. This large-base statistical effect applies to all future Chinese presidents.

Hi. Can you explain a bit more on how China is going to make it currency free floating by 2020? Isnt it currently dollar pegged like rates are announced everyday in Shanghai? What is going to change in that regard.

 

[CHD]

@TaiShang @Martian2 @Chinese-Dragon 我们祝你好运兄弟和五月的力量与你同在

 

[Dungeness]

GDP rises at estimated 7% in 2015
By Xie Jun Source:Global Times Published: 2016-1-13


China's Gross Domestic Product (GDP) grew by an estimated 7 percent in 2015, roughly in line with government targets, China's top economic planning agency said on Tuesday, but warned that 2016 will be a difficult year for the country's economy.

A total of 13 million new jobs were added, and major economic targets were achieved with the launch of a number of government measures, Li Pumin, secretary-general of the National Development and Reform Commission (NDRC), said at a press conference on Tuesday.

Li's comments come at a time when turbulent Chinese stock markets and a sharp decline in the yuan's exchange rate have sparked concerns over a potential "hard landing."

The 7 percent GDP growth, though down from the 7.3 growth in 2014, is slightly higher than estimates of some international financial institutions, such as 6.8 percent by Goldman Sachs and Moody's, and 6.9 percent by Standard & Poor's.

Lian Ping, chief economist of the Bank of Communications, told the Global Times on Tuesday that it's highly probable that China's GDP will be around 7 percent for 2015.

Lian said the fourth quarter GDP is likely to reach 7 percent, as economic data released so far shows that exports, infrastructure investment and consumption have all rebounded.

GDP growth in the first three quarters was 7, 7 and 6.9 percent, respectively.

Difficult 2016

Li said China approved 280 fixed asset investment projects worth 2.52 trillion yuan ($383 billion) in 2015, with 32 projects worth 515.1 billion yuan approved in December alone.

However, he noted that for 2016, the global economic situation will worsen, and the negative effects of China's economy as well as the "long-accumulated problems" might manifest itself to a greater extent this year.

Wang Tao, chief China economist at UBS Securities, also said that 2016 will be a "difficult year" in terms of economic development, and GDP growth will slow down further to 6.2 percent for the whole year.

That's because the process of solving the oversupply in the real estate sector will continue in 2016, Wang said at the UBS press conference in Shanghai on Tuesday.

'Stable' yuanRecent fluctuations in the yuan's exchange rate have also heightened concerns over a rapid slowdown in China's economy, according to overseas media.

The central parity rate of the yuan weakened by 2 basis points to 6.5628 against the US dollar on Tuesday.

But Wang told the Global Times on Tuesday that while weaker against the US dollar, the yuan has been doing fairly well against other currencies.

Therefore, recent currency moves have been "more about dollar strength than yuan weakness," she noted, stressing that currency fluctuations are normal.

The government may also roll out more fiscal and monetary policy adjustments to boost growth in 2016. These measures include two interest rates cuts, several cuts in the bank's reserve requirement, releasing its grip on enterprise bond issuance and increasing infrastructure projects, Wang said.

Xu Hongcai, director of the department of information of the China Center for International Economic Exchanges, predicted economic growth will continue to slide in 2016.

"A 6.8 percent growth is out of question," he told the Global Times on Tuesday.

Lian said that it's very hard to predict the exact GDP growth in 2016 because of too many uncertainties in the world economy, the pace of changes in US monetary policy, as well as activity in China's real estate market.

"If demand in the real estate market rises in 2016, GDP growth might approach or even hit 7 percent. If not, a growth above 6.5 percent is to be expected," Lian said.

@Shotgunner51 , @Keel , @Martian2 , @Chinese-Dragon , @AndrewJin , @cirr , @oprih , @Economic superpower et al.

Expected. China has been pretty accurate on their economy forecasts. They don't give high forecast figures then try to find excuse to justify low results.