Editor's note: China's economy picked up in the first six months of 2023, mainly driven by the secondary and tertiary industries, which include the manufacturing services sectors. Powered by favorable consumption policies and the release of service consumption potential, consumption is expected to maintain its moderate recovery. Four experts share their views on the issue with China Daily.
Boosting exports challenging, not impossible
By Su Qingyi
The share of China's foreign trade in the global market increased even during the COVID-19 pandemic thanks to its successful prevention and control policy and rapid production recovery. However, the outlook for China's foreign trade has weakened since the second half of 2022. In the first half of this year, for instance, China's exports declined by 3.2 percent year-on-year in US dollar terms, putting pressure on the authorities to take measures to stabilize exports.
The difficulties China faces are evident in the decline of shares of some key products exported to some countries. The United States, for instance, adopted a "near-shore outsourcing" and "ally-shore outsourcing "policy during the Donald Trump administration which the Joe Biden administration has been following. Amid the ongoing China-US trade friction, the US has not only imposed trade sanctions on Chinese entities and sought to attract manufacturing back to the country, but also implemented policies to shift its trade dependence from China to allies and neighbors.
According to US Department of Commerce data, US imports of goods from China declined from 21.1 percent in 2016 to 15.04 percent in January 2023. In contrast, imports from Canada, Mexico, the European Union, and ASEAN member states substantially increased during the same period.
The shares of export orders for leather goods, textile raw materials and finished products, footwear, wigs, furniture and toys to the US have dropped significantly, with that for leather goods and bags declining by 29.13 percentage points over the past five years.
Efforts to stabilize China's exports face challenges on both the demand and supply sides. On the demand side, a main challenge is how to deal with transfer of orders. Chinese enterprises have been receiving fewer orders because some buyers are reducing their orders to mitigate geopolitical risks and some competing countries have resumed production.
On the supply side, the challenges stem from domestic production. Some enterprises face supply chain disruptions due to Western sanctions and/or shortage of intermediate goods caused by the Russia-Ukraine conflict, which in turn has affected their production. So they need to find new suppliers or independently develop intermediate goods.
Stabilizing exports requires several measures. First, China should expand into new markets, manufacture new products and adopt a new approach to global trade. It should intensify efforts to retain its shares in traditional markets such as the EU, the US, Japan, the Republic of Korea and Australia while exploring emerging markets like ASEAN member states.
Also, it could consider organizing a series of exhibitions to promote buyer-to-buyer relations between Chinese and foreign enterprises, and facilitate travel for businesspeople by simplifying the visa application process, offering immigration facilitation services including visa issuance and extension, and residence permits, and take measures to attract more foreign buyers. And while promoting the manufacturing of "new products" such as energy vehicles, it should focus on producing goods such as lithium batteries and solar panels in larger quantities to further increase their export volumes.
In the first quarter of 2023, the exports of "new products" such as electric vehicles, lithium batteries and solar panels to the top five markets (the EU, the US, ASEAN, the ROK and the UK) increased by 88.7,88.1, 103.5, 121.7, and 118.2 percent, respectively, accounting for 71.6 percent of the total exports' value of these products.
Moreover, given the growing demand for talents in cross-border livestreaming and cross-border e-commerce operations due to the increasing use of cross-border livestreaming by many foreign enterprises to obtain orders and the digitalization of foreign trade, China should intensify the cultivation of talents in cross-border digital marketing to tap the potential of this emerging means for expanding exports.
Second, there is a need to localize the industry chains and strengthen supply chain security in order to ensure undisrupted production. For that, however, the authorities have to encourage enterprises to replace imported intermediate goods with domestically produced ones or find alternative sources in other countries. Specifically, industries such as aviation engine, gas turbine, large aircraft building, and semiconductor manufacturing are, to varying degrees, dependent on imported high-end products because of lack of expertise in some advanced technologies, bottlenecks in material supply chains or inadequate industrial support or all three reasons.
Third, China should promote the use of the renminbi to settle foreign trade deals and increase investment in projects in foreign countries, in order to boost imports and exports. It should, for example, continue to promote renminbi swaps, a crucial step in the internationalization of the Chinese currency, and encourage the use of the renminbi to settle cross-border e-commerce deals too, while promoting cross-border mobile payments and allowing domestic third-party payment settlement platforms to provide overseas mobile payment services.
By implementing these policies, the authorities can drastically reduce China's dependence on imported goods and services, maintain the stability of the supply chains, promote the internationalization of the renminbi, and contribute to the sustainable development of foreign trade and economic growth.
The author is a researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. The views don't necessarily represent those of China Daily.
Ample room for growth of realty sector
By Chen Jie/Guo Xiaoxin
National Statistics Bureau data for the first half of
this year, which were released on July 17, show the sales of new residential houses further declined by 2.8 percent, following the significant drop of 26.8 percent in 2022.
The declining housing sales have triggered widespread concern over the future of housing demand. After the per capita built-up urban housing space exceeded 38 square meters, the shortage of housing in urban areas all but disappeared. Combined with that, the rapidly aging population and the declining fertility rate could seriously constrain the demand for newly-built housing.
However, the Chinese real estate industry still has ample room for development, because there are three groups of "200-million people" each with substantial demand for improved housing, meaning there are three structural opportunities for increasing investment, which in turn could become a key driver for the development of the real estate industry. Nonetheless, proper policy innovations are needed to meet that demand.
The first group of the "200-million people" refers to new urban residents, mainly comprising people migrating from rural to urban areas and new graduates. According to the Monitoring Report of Rural-Urban Workers (2022) released by the National Bureau of Statistics in April, about 171.9 million workers with rural hukou (household registration) are working in urban areas, and their per capita housing space is only 22.6 square meters, far less than the national average. In particular, per capita housing space for workers with rural hukou in cities with more than 5 million people is only 17.6 square meters.
Besides, for the first time more than 10 million youths graduated from college in 2022, and the total number of youths who graduated from universities in the past three years is estimated to be more than 28 million. And since most of the new graduates are living in overcrowded, low-standard accommodations, they have a strong demand for improved housing.
To bridge the gap between rural people who have migrated to urban areas and the average urban resident in terms of per capita housing space, the real estate industry needs to build at least 3.2 billion sq m of new housing space in the next few years. Assuming an investment of 10,000 yuan ($1,401.40) per sq m is needed for building new housing, it would require an investment of at least 3 trillion yuan, which is three times the total investment in housing construction in 2022.
But the new urban residents' housing demand is constrained by their low affordability, as housing prices in cities are very high. So the government is seeking to develop a new investment model for housing that will attract more capital and make housing affordable for most new urban residents.
The second group of "200-million people" comprises urban residents living in dilapidated neighborhoods. According to the seventh national census conducted in 2020, about 31 percent of urban households, or 270 million urban residents, were living in buildings built before 2000. These old buildings are often poorly designed, equipped with outdated facilities and require frequent repairs and renovation.
The neighborhoods this group lives in are usually poorly maintained, lack good public facilities and are functionally inadequate to meet the requirements for decent living. In March, the Ministry of Housing and Urban-Rural Development announced that 167,000 old neighborhoods have been renovated at a cost of 660 billion yuan over the past five years, benefiting 29 million households and 80 million people.
But despite the government spending huge amounts on repairs and renovation, the old neighborhoods still cannot meet residents' decent housing demands.
Additionally, in most cases, the old neighborhoods need more than repairs and renovation; they require comprehensive reconstruction. Many buildings need to be demolished and built anew. This means substantial investment opportunities for the real estate and related sectors. As the total built-up housing space in the country was estimated to be about 35 billion sq m in 2020 according to the seventh national census, one can assume the built-up space area of residential buildings constructed before 2000 is more than 10 billion sq m. And considering that the renovation cost would be 1,500 yuan per sq m, it would require an investment of 1.5 trillion yuan.
Moreover, a significant number of these buildings and neighborhoods may need to be demolished and built anew. But most households in such neighborhoods cannot, on their own, afford the high cost of renovation or reconstruction.
The third group of "200-million people "is that of senior citizens who need accommodation that can cater to their special needs. According to the National Bureau of Statistics, the population of people aged above 65 at the end of 2022 was 212 million, accounting for 14.9 percent of China's total population. And their population is expected to exceed 327 million by 2035.
The elderly people have special and specific needs. So developing elderly-friendly communities and modifying housing to meet elderly people's special needs can allow them and their family members to live in a safe and healthy environment, reducing the elderly people's stress and risk of physical injury, and alleviating their anxiety.
Such housing communities and housing modifications would also help increase the elderly people's access to surrounding environments and public facilities, and make them feel self-sufficient, giving them a sense of satisfaction. Elderly-friendly neighborhoods and housing modifications also require huge amounts of investment. Assuming the cost of housing modification to meet the elderly people's needs is 1,000 yuan per sq m, it would require at least 8 trillion yuan to modify the houses for 212 million people.
However, financing for elderly-friendly modification projects is not easy to come by, as most elderly people can neither afford the cost nor are likely to pay, if they could, for such modifications.
Yet there is a significant demand for new housing and housing improvement. In most cases, however, the requirements to meet such a demand should be included in the overall plan for socioeconomic development. For example, in the 2023 Government Work Report, the State Council, China's Cabinet, said that policy support would be provided for strengthening community home-based eldercare services which would include policies on taxes, housing, and water and electricity charges.
On July 18, the Ministry of Housing and Urban-Rural Development and six other departments jointly issued a document to promote the renovation of old urban residential areas, putting emphasis on three key renovation points — "corridor revolution", "environmental revolution" and "management revolution" — and stressing that such renovation is crucial to meet people's rising demand for a decent life.
Furthermore, high-quality renovation of old residential areas will not only improve people's livelihoods but also help promote economic growth. But there are also some challenges when it comes to implementing these projects: the narrow profit margin in building affordable housing, renovating neighborhoods, and modifying housing for the elderly people.
It is thus necessary to develop a new model for sustainable financing for these projects while creating a favorable environment to attract more capital to the sector. And the government should take measures to leverage the role of communities, incorporate grassroots organizations into the housing renovation and development plan, set up consultation and discussion platforms, in order to improve neighborhoods, develop beautiful cities, and promote the growth of the real estate sector.
Chen Jie is a professor at the School of International and Public Affairs, Shanghai Jiao Tong University. Guo Xiaoxin is an assistant researcher at the Institute of Applied Economics, Shanghai Academy of Social Sciences. The views don't necessarily represent those of China Daily.
Central leadership keen to promote private economy
By Liu Yingqiu
The guideline the Communist Party of China Central Committee and the State Council, China's Cabinet, released on July 19 to boost the growth of the private economy is a milestone in the history of private sector development. The task of implementing the guideline, as such, will now be part of the economic development plans of governments at all levels.
China's experiences in building and developing its market economy since the launch of reform and opening-up in the late 1970s show that the top priority for fulfilling the 31 requirements in the guideline document is to develop a favorable environment for the development of the private economy and foster a sound relationship between the government and private enterprises based on rule of law. The key to fostering a sound relationship between the government and private enterprises is managing economic issues strictly in accordance with the law.
As for private enterprises, they must operate independently, participate in fair and open competition on an equal footing, and always adhere to relevant laws and regulations. The private enterprises also need to focus on promoting and operating legitimate, upright businesses, while taking reasonable risks without speculating, promoting innovations, making scientifically sound business choices, and maintaining a rational and effective production structure to ensure high-quality development.
Furthermore, they should strive to cultivate a culture of integrity and fortitude, while improving the business governance system, and the internal audit supervision and financial management, including distinguishing between corporate assets and personal or familial assets of shareholders and establishing a modern corporate system with clear property rights, standardized governance, effective checks and balances, and competitive capability.
The government, on its part, should ease its administrative control over private enterprises and, instead, provide efficient and law-based services for the private economy, by standardizing the administrative approval, licensing and filing processes, establishing mechanisms for addressing complaints, removing market access barriers, improving the system for collecting and reporting cases, periodically releasing negative lists, preventing the use of administrative or other means to interfere in economic disputes or inappropriately seize, freeze or confiscate corporate assets beyond the scope of authority.
These reforms aim to build a stable, fair, transparent and predictable administrative and socioeconomic development environment, by adhering to the "Zhejiang model" of the government not meddling in private enterprises' affairs unless they seek its help. By doing so, the government can contribute to building a socialist market economy with distinctive Chinese characteristics, establishing a strong bond between a fair and effective market and a business-facilitating government.
Building a favorable environment for the private economy and facilitating its healthy growth will require substantial efforts. For that, the government needs to not only deepen reform and expand opening-up but also establish better collaboration and cooperation between government departments at all levels and enterprises, including State-owned, private and foreign-funded companies.
However, the immediate focus of all parties concerned should be on implementing the various provisions of the guideline. By fulfilling the requirements of the guideline, the governments at different levels can boost the confidence of private enterprises, especially private entrepreneurs, and make them confident about the future of their businesses. This, in turn, will effectively curb the economic slowdown and boost the country's economic recovery, paving the way for realizing China's goal of becoming a modern socialist country and achieving the rejuvenation of the Chinese nation.
The author is a researcher at the Chinese Academy of Social Sciences and a member of the Forum 50 for Non-government Economy of China. The views don't necessarily represent those of China Daily.
