Davos Thought Leaders Optimistic on China’s Economy

A slowdown and trade war won’t derail world’s second-largest economy, they say.

At the World Economic Forum in Davos, Switzerland, thought leaders are optimistic on China’s future despite a slowing economy and the ongoing trade war between President Donald Trump and China.

Jin Keyu, an economics professor at the London School of Economics and Political Science, opened a panel discussion by saying that there is confusion as to why the economy is slowing. Keyu blames that on government deleveraging over the past two years rather than the trade tensions, which didn’t help emerging market nations that depend on China. “We have seen leverage really stabilize or come down in various sectors,” she said. “For me, it’s slower, but safer.”

China’s gross domestic product increase was 6.6% last year, down 0.3 percentage points from 2017. It is projected to shrink to 6.3% this year, according to the International Monetary Fund.

For consumer-driven China, trade has complicated things by creating public anxiety, said Glenn Youngkin, chief executive officer of the Carlyle Group.

Fang Xinghai, vice chairman of China’s Securities Regulatory Commission, agreed, adding that while the country has some “short-term challenges,” they are “medium-term,” meaning three to five years. “If you look at that (three- to five -year) horizon, the Chinese economy should be very healthy and continue to be a huge growth engine for the world,” he said.

As to the conflicts between Trump and Chinese leader Xinping Ji, Youngkin said he expects a deal to be made by summertime. “The underpinnings are going to be when the heat gets turned up to the point where both sides recognize we need an agreement,” he said, adding that a deal will have an immediate impact on global growth as well as in both countries.

Timothy Adams, president and CEO of the Institute of International Finance, also said a summer deal is likely, but noted there should have been a deal 18 months ago. “I think the stickier issues, which won’t be resolved in the short-term, is what do you do about structural changes, SOE’s [state-owned enterprise], and the role they play in opening up [the] markets and the technology transfer,” he said.

“Nobody wins in a trade war,” said John Zhao, chair and CEO of Chinese private equity group Hony Capital. “Now we’re at a point where the harm—both short-term uncertainty and long-term harm—is surfacing and people [are] starting to reflect how we got here.”

Zhao said that to reach a resolution, the US and China need to create a win-win situation, as going backwards would create “big-time losers.”  

“We’re at the age where globalization is getting to 4.0 supported by proliferation of digital technology and the internet,” he said. “I think we have some work to do and I’m very confident through time and effort we’re going to work through these structural issues and other issues.”

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