Can China's economy remain ‘the only thriving branch of the tree’?

At the beginning of 2013, various circles of the society are widely concerned whether China's economy can hit the bottom and start rebounding. Some people believe China's economic growth will be dragged down by foreign trade in the context of weak economic recovery and shrinking foreign demand in Europe and the United States. Experts said it is not likely for China to remain immune as "the only thriving branch of the whole tree" in today's increasingly globalized economy.

Prosper or lose together

Looking back on 2012, the world economy showed a gloomy picture with further intensified European debt crisis, slow recovery of the U.S. economy which is faced with the "financial cliff" crisis, declined growth rates in most of the emerging economies, and turbulent political situation in West Asia and North Africa... China was unable to shed some light on this whole picture, either, but also perplexed in long term by economic downturn.

Experts said the world economic recovery will still lack motive power in 2013. The sluggish external demand and dropping growth rate of foreign trade will continue to be one of the important factors affecting China's economic growth. Qiu Sisheng, who is in charge of research and investment analysis of Citibank (China) Co., Ltd., said foreign trade will not be able to bring any positive contribution to China's economic growth; instead, it may pull down the overall economic growth rate by 1 percentage point. The most obvious reason is that Europe has not yet shaken off the shadow of economic recession.

With the improvement of economic openness, China's economy is increasingly associated with the world economy.

"Foreign trade will no longer provide any strong pulling force on economic growth as it used to," Xu Hongcai, vice director of the Information Department of China International Economic and Exchange Center, said in an interview with People's Daily Online.

Xu said China's exports contributed negative growth to economic growth last year, which was obviously due to the negative impact of sluggish U.S. and European economies.

When the nest is overturned, no egg stays unbroken

"When the nest is overturned, no egg stays unbroken." Since China's reform and opening up, there have been increasingly close ties and deepened mutual influences between China and the outside world. According to relevant expert studies, China's export growth may decline by 5 percentage points for every 1 percent drop of the U.S. GDP.

"In today's world economy, there is a part of each in the other among us all. It would be downright ludicrous if any country were to close the door and carry out construction alone. The degree of association of China's economy with the world economy can be seen from the import and export figures."

According to Chinese customs statistics, China's foreign trade import and export value reached more than 3.9 trillion U.S. dollars in 2012.

After melting into the global economy, China gets a lot of opportunities for development, but also constantly suffers negative impact of the international financial crisis. The world economic recession during the global financial crisis in 2008 had a great influence on China. Over the past year, the U.S. and European financial crisis, the quantitative easing policies as well as trade protectionism in developed countries, all buffeted China's export and domestic markets.

For the future, experts predict a still grim external environment for China to sustain its economic growth because of the complex and changeable international economic environment with the global economy still in deep structural adjustments.

Vice Finance Minister Zhu Guangyao said China's economy faces extremely challenging external environment in 2013 due to the further increased instability and uncertainty in the world economy. In particular, European and the U.S. economies as China's main export markets are in a difficult adjustment period. The euro area is undoubtedly already in recession. The key problem for the United States is how to properly control the risks of "financial cliff".

Zhu said failure in properly controlling the "financial cliff" problem would cause a direct impact of 4.8 percent GDP drop in the U.S. economy and might drag down China's economic growth rate by 1.2 percent.

Read the Chinese version at: 中国经济还能“风景独好” 吗？, Source: People's Daily Overseas Edition, Author: Luo Lan