[New Year Interview] Cheon Wonling "China Chooses Stability Despite Low Growth Rate"

[Insights from US-China Experts] The 2020 Economy of G2 After Phase 1 Trade Agreement
- Cheon Wonling, Chief Economist at China International Economic Exchange Center

[Asia Economy Beijing=Special Correspondent Sunmi Park] "I believe that structural issues the United States is demanding China to resolve amid the trade war can find common ground. Since China also desires changes in its national management approach, this year will focus on 'stability.'"

Chen Yuanling, Chief Economist of the China Center for International Economic Exchanges (CCIEE), an economic advisory body to the Chinese government (photo), recently emphasized in a New Year interview with Asia Economy that there are sufficient areas where agreement can be reached regarding this year's US-China trade negotiations. He predicted that although China's economic growth rate may slightly decline this year, the overall outlook will remain stable, accompanied by proactive fiscal policies and fine-tuned monetary policies such as additional cuts to bank reserve requirements.

Chen is known for his research on China's accession to the World Trade Organization (WTO) and is recognized as an economic expert who annually participates in drafting the Premier's speech at the Central Economic Work Conference and the government work report for the National People's Congress, China's highest political event known as the Two Sessions.

Regarding the Phase One trade agreement between the two countries, which is pending final signature, Chen assessed that most disagreements have been resolved. He highlighted that imports of US agricultural products have already resumed, and improvements are underway through legal amendments on issues such as intellectual property (IP) protection and forced technology transfers of foreign companies. He cited the full implementation of the Foreign Investment Law aimed at actively improving the business environment for foreign companies, the establishment of dedicated IP handling teams in courts, and the relaxation of equity investment restrictions for foreign financial firms as representative examples of China's ongoing changes.

He stated, "China holds the world's first or second largest number of patents in various fields including 5G, increasing the necessity for IP protection. Moreover, under market opening policies, foreign companies are recognized as needing the same protection as Chinese companies." He emphasized, "The important point is that these improvements were not made under pressure from the US but because China itself recognized their necessity."

Chen also expressed a relatively positive outlook on the upcoming Phase Two negotiations, mentioning that, like Phase One, common ground can be found. He stressed that there is already strong internal support for reforms in industrial subsidies and state-owned enterprises, which the US demands. Chen said, "For certain industries that need nurturing, China could consider government public procurement projects, similar to the US and Europe, rather than subsidy payments. I believe finding agreement on industrial subsidies between the US and China will not be difficult."

However, he pointed out discomfort with the US attitude of applying its domestic laws as a standard to interfere with other countries' systems and imposing them on foreign companies, citing various regulations currently imposed on China's Huawei as an example.

He said, "The US regulations on Huawei and forcing its allies to comply go beyond the scope of the trade war and resemble a technology war. The issue of the US suppressing Chinese advanced technology companies by force requires government intervention to resolve." He added, "The sanctions on Huawei are increasingly harming US companies that do business with them," warning that sanctions targeting Chinese advanced technology firms could ultimately damage US companies.

Chen noted that although the Chinese government’s economy has been impacted by the trade war, it is not at a level warranting serious concern. From this perspective, he confidently described this year's characteristic of the Chinese economy as "stability." He said, "China's economic growth rate, which was 6.6% in 2018, is expected to decline to around 6.1% last year due to the trade war and economic restructuring. This year, growth is also expected to be around 6%. Given that China's GDP is approaching $14 trillion, it is unrealistic to expect growth rates of 9-10% as in the past."

He added, "If the trade agreement is well handled this year and the US returns all high tariffs on Chinese goods to previous levels, China's economy will grow slightly more than expected. But above all, the elimination of economic uncertainty is a positive aspect." However, he cautioned that if the direction of the trade agreement remains unclear, it could affect foreign capital investment in China, so this area should be carefully monitored.

Chen believes that the Chinese government's economic policy this year is more likely to pursue qualitative improvements through proactive fiscal policy rather than forcibly raising the growth rate. He particularly predicted that President Xi Jinping will pay special attention to achieving zero poverty in China this year. To this end, he expects fine-tuned monetary policy adjustments targeted only at specific goals to enable private and small-to-medium enterprises to more smoothly secure funding.

◆ About Chen Yuanling, Chief Economist

- Chief Economist at China Center for International Economic Exchanges (CCIEE)

- PhD in Economics from the Graduate School of the Chinese Academy of Social Sciences

- Former President (Director-level) of the Research Office of the State Council of China

- Participant in drafting government work reports for the Two Sessions

This content was produced with the assistance of AI translation services.