Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Why Chinese Economic Reforms Will Stay the Course

Economics / China Economy Dec 18, 2018 - 02:25 PM GMT

By: Dan_Steinbock

Economics After four decades of reforms and opening, China is accelerating the transition to post-industrial society.

As Chinese President Xi Jinping gave his highly-anticipated speech on Monday on the 40th anniversary of Chinese reforms and opening-up policies, it was closely watched internationally in light of the 90-day truce in the U.S. trade wars.


Xi called the pursuit of reform and opening-up and socialism with Chinese characteristics “a milestone in realizing the Chinese nation's rejuvenation.” He emphasized the importance of innovation, which has been prominently displayed by world-class productivity in the Greater Bay Area of South China, and international cooperation, as evidenced by the One Road One Belt initiative that’s fueling 21st century globalization.

In particular, Xi’s speech was very clear about China’s historical debt to Deng Xiaoping other reformers – and the need to go further.

China’s pragmatic transitions

In Chinese modern history, it was Sun Yat-sen, the founding father of the nation, who paved the way for sovereignty with his “three principles” of nation, democracy and socialism. But followingr imperial disintegration and Western colonialism, these efforts could be started only after world wars, Japanese invasion and a Civil War.

When in 1949 Mao Zedong could finally declare that “the Chinese people have stood up!”, China began the march to a new future. In the early 1950s, Mao’s economic policies unleashed state-led industrialization, which started promisingly but stagnated amid the Cold War polarization. In historical view, Mao’s crucial contribution was the establishment of Chinese sovereignty.

Already by the early 1960s, foreign minister Zhou Enlai called for the “Four Modernizations” in agriculture, industry, defense, and science and technology. These reforms started in the late ‘70s, when Deng Xiaoping initiated the “reform and opening” era, with the Special Economic Zones (SEZs) first in Southern China, then in Shanghai, Beijing and elsewhere.

It was Deng’s bold pragmatism - “It doesn’t matter if the cat is black or white as long as it catches the mice,” as he put it - that finally led to the inflow of foreign investment and technology, business success, and parallel price structures. With extraordinary foresight, Deng understood the opportunities of globalization, but also knew the risks of the international environment in the Reagan-Thatcher era when “one had to cross the river by feeling the stones” - a phrase that Xi quoted approvingly in his speech.

As President Jiang Zemin pushed the role of the private sector – “the Three Represents” doctrine – and Premier Zhu Rongji began the struggle against corruption in the 1990s, China became the member of the World Trade Organization (2001). That paved the way to a decade of export-led double-digit growth, which President Hu Jintao characterized as “China’s peaceful development.”

The fourth great transition – the shift to post-industrialization – has been intensified by the Xi leadership.

Trade, markets and the Party

Just as the WTO membership allowed China to execute tough reforms, U.S. trade wars may actually accelerate Chinese reforms, as long as compromise makes pragmatic sense.

Xi’s reform speech offered clarity in a difficult international environment that is often overshadowed by ideological misinterpretations of economic fundamentals. Recently, New York Times reported that China was amid “a steep downturn.” Yet, the growth forecast for the year remains 6.5- 6.6%, after a strong first half. Moderation will ensue in the second half and especially in 2019, depending on U.S. tariffs and slower demand worldwide.

U.S. may be navigating toward a correction by 2019-20, which will prove challenging to all major economies. Indeed, many Americans oppose President Trump’s policies and the word “impeachment” is getting louder in the Capitol Hill. Meanwhile, a bipartisan group of senators -Rob Portman (R-Ohio), Doug Jones (D-Ala.) and Joni Ernst (R-Iowa) - seeks to claw back trade power from Trump with legislation. They hope to “better align” Section 232 of the Trade Expansion Act of 1962 with its “original intent,” which was to respond “to genuine threats to national security.” Foreign cars and car parts are not exactly a typical geopolitical threat.

In his speech, Xi also emphasized the role of the Chinese Communist Party in the reforms. Historically, when China has thrived, it has been attributed to “Westernization” in the West, and when China has ailed, it has been attributed to Chinese communism.

The West has not yet come to terms with the inconvenient truth that China’s economic miracle has been possible because of the Party’s leadership, not despite it. Unlike the West where middle classes continue to shrink at the expense of the ultra-wealthy, China is expanding middle classes, fighting corruption and fostering sustainability.

Irrespective of Washington’s trade actions, U.S. trade wars will not change the course of Chinese reforms which will continue to broaden and deepen. China will “stay the course,” as Xi put it, while stressing that “no one is in a position to dictate to the Chinese people what should or should not be done.”

Like Liu He, Xi’s economic adviser, Chinese reformers are determined to complete by the late 2020s the rebalancing of their economy, which is rapidly moving toward consumption and world-class innovation.

Dr Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more information, see http://www.differencegroup.net/

© 2018 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dan Steinbock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules