1、Xi Jinping as an ordoliberal: Chinas margins for growth in 2022POLICY PAPER FEBRUARY 2022Xi Jinping as an ordoliberal: Chinas margins for growth in 2022Institut Montaigne is a nonprofit, independent think tank based in Paris, France. Our mission is to craft public policy proposals aimed at shaping p
2、olitical debates and decision making in France and Europe. We bring together leaders from a diverse range of backgrounds government, civil society, corporations and academia to produce balanced analyses, international benchmarking and evidence-based research. We promote a balanced vision of society,
3、 in which open and competitive markets go hand in hand with equality of opportunity and social cohesion. Our strong commitment to representative democracy and citizen participation, on the one hand, and European sovereignty and integration, on the other, form the intellectual basis for our work. Ins
4、titut Montaigne is funded by corporations and individuals, none of whom contribute to more than 3% of its annual budget.POLICY PAPER FEBRUARY 20225www.institutmontaigne.org/enThere is no desire more naturalthan the desire for knowledgeABOUT THE AUTHORFranois Godement, Senior Advisor for AsiaFranois
5、Godement is Senior Advisor for Asia to Institut Montaigne, Paris. He is also a non-resident Senior Associate of the Carnegie Endowment for International Peace in Washington, D.C., and an external consultant for the Policy Planning Staff of the French Ministry of Foreign Affairs. Until December 2018,
6、 he was the Director of ECFRs Asia and China Program and a Senior Policy Fellow at ECFR.A long-time professor at Frances National Institute of Oriental Languages and Civi-lisations and Sciences Po, he created Centre Asie IFRI at the Paris-based Institut Franais des Relations Internationales (1985-20
7、05), and in 2005 Asia Centre. He is a graduate of the cole Normale Suprieure de la Rue dUlm (Paris), where he majored in history, and was a postgraduate student at Harvard University. In 1995 he co-founded the European committee of the Council for Security Cooperation in the Asia-Pacific (CSCAP), wh
8、ich he co-chaired until 2008. His last published book (with Abigal Vasselier) is La Chine nos portes une stratgie pour lEurope, Odile Jacob, 2018.For Institut Montaigne, he recently authored Europe and 5G: the Huawei Case (May 2019, with Mathieu Duchtel), Digital Privacy, How Can We Win the Battle?
9、(December 2019), Fighting COVID-19: East Asian Responses to the Pandemic (April 2020, with Mathieu Duchtel and Viviana Zhu), Europes Pushback on China (June 2020), Wins and Losses in the EU-China Investment Agreement (CAI)(January 2021), and Chinas Economic Rebound: Views from Beijing (June 2021).7w
10、ww.institutmontaigne.org/enwww.institutmontaigne.org/en6Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11、 . . . . . . . . 7I. The 2021 economic rebound and the trend to a long-term slowdown . . . . . . 8II. The available margins in 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12III. The
12、 structure and balance of Chinas public budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15IV. Budgetary policy and the management of the central-local relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13、 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18V. Preserving conservative fiscal and budget policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23VI. Monetary and credit policies .
14、. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15、 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16、 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31INTRODUCTION2022 could be seen as the year when China entered the middle-income trap. In fact, it has likely reached the ceiling of upper-middle-income countries as defined by the World Bank (USD 12,535 per capita GDP in 2021), given the g
17、rowth performance in 2021 and the reevaluation of the renminbi (6.5% to the USD in 2021, 10% since June 2020).The arguments for the slowdown include productivity issues, a difficult transition to household consumption and services, a potential bubble economy symbolized by a real estate crash in the
18、summer of 2021, a significantly very reduced birth rate, and an energy transition supply crisis in the same year. The warnings voiced long ago by former prime minister Wen Jiabao that Chinas growth rate was unsustainable without major changes would become a reality. The govern-ment itself currently
19、acknowledges three pressures: demand contraction, supply shock, and weakening expectations. However, these are circumstantial rather than structural issues.This slowdown is part of a trend. China has not seen double-digit growth since 2010, and the countrys growth rate has been declining almost ever
20、y quar-ter. 1 Xia Bin, director of the State Councils finance institute at the Development Research Center, notes that in the twenty years since 2003, Chinas economic growth has been in step-by-step decline every four years. 2 After 2010, 6% was conventionally seen as the government policys floor ta
21、rget, narrowly missed only in 2019.Less obvious, and less commented, is the fact that the government, since the coronavirus outbreak of early 2020, and even more since early 2021, has main-tained a restrictive policy for the public budget, credit and interest rates. This was debated among Chinese ec
22、onomists in the past two years, but the overall policy has remained contractionary.There may therefore also be more margins for government action and support to the economy than generally recognized. This note intends to evaluate the reasoning behind this persistent government policy, and the potent
23、ial for change in 2022.TABLE OF CONTENTS1 Yu Yongding, “Fourteen observations on 2022 macroeconomics (关于2022年宏观经济的十四点看法)”, China Finance 40 Forum, January 25, 2022, https:/archive.ph/wip/r6RuV2 Xia Bin, “2022: What should be the key focus of stability prioritization”? (2022年：“稳字当头”要重点关注什么？)”, Aisixi
24、ang, January 9, 2022, https:/archive.fo/13mQ99www.institutmontaigne.org/enwww.institutmontaigne.org/en83 Tom Hancock, “Goldman Lowers China 2022 Growth Forecast to 4.3% on Omicron”, Bloomberg, January 11, 2022,ahttps:/ IMF, Rising Caseloads, A Disrupted Recovery, and Higher Inflation, January 2022 h
25、ttps:/www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022ITHE 2021 ECONOMIC REBOUND AND THE TREND TO A LONG-TERM SLOWDOWNThe consensus prospect for Chinas economy in 2022 points to a growth rate that is significantly under the long-term trend. GDP growth in C
26、hina had ave-raged 9.44% annually between 1978 and 2018. For example, Goldman Sachs, which cannot be not suspected of underplaying China, has diminished its forecast for 2022 from +4.8% to +4.3%, 3 and the IMF has reduced its growth forecast from 5.5% to 4.8%. 4 This is barely half the official figu
27、re for 2021 which was, of course, a recovery year from the 2020 pandemic. The 8.2% 2021 figure is from a low base of 2020 and, therefore, somewhat deceptive. Sequential quarter growth in 2021 was lower than in the last pre-pandemic year: 0.3% in Q1, 1.3% in Q2, 0.7% in Q3, and 1.6% in Q4. Consumer s
28、pending and construction activity slowed down: neither retail goods sales nor catering have recovered to their pre-Covid levels, and the government attacks on digital platforms have slowed down the growth of online sales.There is a further sign that Chinas growth is running below its potential growt
29、h rate, despite its reported figure: while inflation is taking hold in the rest of the world, Chinas consumer price index (CPI) only rose by 0.9% in 2021. There are circumstantial reasons for this: pork prices, a large component of the CPI, have gone down by 45% since the end of a swine epidemic; re
30、evaluation of the renminbi lowers import prices. The producer price index (PPI), although up by 8.1%, did not recover to its pre-pandemic level and fell in December 2021. Much of this PPI rise is due to the rise in energy prices for producers, and the gap with the CPI indicates that these production
31、 costs were not passed on to consumers. While the rest of the world renews with inflation, a consumer price slowdown in China indicates major issues with growth.THE 2021 ECONOMIC REBOUND AND THE TREND TO A LONG-TERM SLOWDOWNNot all trends point in the same direction, however. The silver lining remai
32、ns Chinas exports. Chinas export growth has often been described as reaching its limits over the past two years, regarding the share of global exports and its acceptability by the countrys trade partners. Yet, the trend continues and is even accelerating. Once again, history comes to mind: for sever
33、al years running, former PM Wen Jiabao had also announced in his time a slowdown in exports, which never materialized. We have a similar situation today. Since the pandemic started, trade economists have forecasted Chinas trade surplus rebound as a one-off event. It was due to abate soon, under the
34、twin weight of slower international demand and a domestic economic shift towards consumption and, therefore, more imports.Nevertheless, here we are, with an announced Chinese trade surplus in goods of USD 674 billion for the whole year, or about 4.4% of the expected GDP. This trend is even more pron
35、ounced towards the European Union (EU). Although the EU household consumption rate grew much less than in the US (2.5% to 3% vs. 10% at year-end 2021), Chinas exports to the EU have increased by 57% over 2020, and “only” by 27% to the United States. Chinas export mix from medical equipment to house
36、furniture, computer chips, batteries and other alternative energy products as well as 1.6%Source: Statistics published on the website of the National Bureau of Statistics of China.Graph 1: Chinas CPI and PPI (2011 - 2021, YoY)CPI PPI0%5%10%-5%-10%2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
37、16%-1.7%-1.9%-1.9%-5.2%-1.4%6.3%3.5%-0.3%-1.8%8.1%5.4%2.6%2.6% 2.0%1.4%2.0%2.1%2.9%2.5%0.9%10 11www.institutmontaigne.org/en www.institutmontaigne.org/enXI JINPING AS AN ORDOLIBERAL: CHINAS MARGINS FOR GROWTH IN 2022intermediate capital goods is the basis for this performance. Overall, external dema
38、nd has likely contributed over 20% to GDP growth from December 2019 to December 2021 5. China still had a deficit for trade in services in 2021 but at USD 82 billion according to official SAFE figures, it is down by 44% over 2020 figures from OECD data. 6The other positive contribution concerns FDI
39、and other capital flows to China. 7 Offi-cial currency reserves “only” increased by USD 146 billion in 2021, standing at USD 3.25 trillion at the end of December. Although China claims to be the first global direct investor, income from investment abroad is still low. Most capital inflows were the w
40、ork of non-bank companies, including short-term cash-flow deposits by Chinese or foreign companies, which were not reflected fully in central bank reserve numbers. As was the case in 2020, Chinese banks are reputed to have purchased dollar-denominated or dollar-correlated bonds abroad on behalf of t
41、he central bank to reduce the pressure for reevaluation of the renminbi. This action also explains the large increase in Chinese investments abroad and their current low returns. In 2021, the surplus from cross-border receipts and payments by non-banking sectors was USD 356.4 billion. FDI into China
42、 stood at USD 173 billion in 2021, a 20% increase over 2020. 8 Official statistics from developed eco-nomies usually understate FDI and other capital flows to China, mostly because they often transit via tax havens. 9Chinas current account surplus is not, of course, much of an economic surprise. It
43、is largely a consequence of the countrys export performance, which was itself the surprise to many economists. With regards to financial flows and the capital account, it is of course a political surprise to consider how international companies and financial operators have parted ways with the parti
44、al decou-pling or even diversification concept. It is also worth noting the extent to which opportunity risks from sudden policy changes in Beijing or geopoli-tical risks are being discounted, not to mention concerns about due diligence. The main consequence is that it is difficult to see a domestic
45、 downturn or a financial crisis turn into an international sell-off of Chinese assets or major turn away from investment in China. Despite the demise of bonds sold by real estate companies to investors operating from abroad, short-term debt from China, including from the semi-private sector, remains
46、 attractive. FDI into China is reportedly less targeted at greenfield and production facilities and more into services, or in research and innovation, which are also classified as services in China. The overall trend is still upwards. It is also reflected in the rise of venture capital investment, r
47、eported at USD 129 billion in 2021, largely into sectors that are favored by government policy, such as semiconductors, biotech and IT. 10This provides the Chinese ship, as it sails into the 2022 waters of the 20thCCP Congress in the fall, with a stabilizing keel that prevents it from capsizing. Chi
48、na is flush with international currency reserves and short-term cash inflows, and its external debt position is better than that of many developed econo-mies. These strengths may be enough to prevent an international “grey rhino (灰犀牛),” as Chinese commentators often like to call it, from disrupting
49、Chinas path in 2022. They may also serve to prevent a major international geopolitical crisis from damaging China. As with the so-called “dual circulation” economy, national security, self-sufficiency in key areas, and capacities are the key components of Chinas overarching economic strategy. Admitt
50、edly, these are short-term priorities: in the longer run, large importer countries carry the most weight in international trade negotiations; the ability and willingness to borrow and increase international debt is the main pathway towards creating an international currency. Chinas choices reflect a
