The Global Economy in Turbulent Times

CHAPTER 141 China: Rebalancing Growth with Reform and Moving Up to the Next Level¹

What’s happening in China has a direct consequence on Southeast Asia, and Malaysia, in particular. Of late, China’s growth has slackened—surprisingly subdued by normal standards. Its growth in fixed investment, housing, retail sales, and factory output has hit multiyear lows in the first quarter of 2014. This has rattled global investors, worried that this will soon become a drag on activity worldwide. Already, Asia’s growth risks being dampened by China’s slowdown. It so happens this sets the stage for China’s recent annual sessions of the National People’s Congress (NPC) in early March 2014. Even as the Chinese Prime Minister emphasized the urgent task of deep reform before the top legislature, as reflected in his Government Work Report (GWR) outlining the roadmap for China’s economic and social reforms for 2014, he declared the growth target for this year to be “about” 7.5 percent (unchanged from the goal set for 2013 when the economy actually rose by 7.7 percent).² What’s new is the addition of the word “about” alongside the target, compared with previous NPC sessions. It is supposed to signal some tolerance below 7.5 percent if it’s tilted toward quality (i.e., so long as growth slides toward domestic consumption and so long as the fight against pollution continues. After all, “7.3 percent or 7.2 percent would count.”

Growth and Reform

China’s approach to reform is both cautious and gradual. ...