Wang Yongli Wen
The economic balance between China and the United States exceeded expectations
In 2020China was the first to suffer the impact of the new crown epidemic, but after the whole country vigorously fought the epidemic, it took the lead in achieving a phased victory in the fight against the epidemic, and actively supported other countries to fight the epidemic, becoming the only country among major economies to achieve positive economic growth (23%）。The U.S. has been hit by the pandemic since March 2020, and despite the introduction of extremely loose macro policies, economic growth was -35%，The GDP ratio between China and the United States reached 703%。China's economy grew by 8 in 20211%, the U.S. economy grew by 57%，The GDP ratio between China and the United States rose further to 773%
In 2022China was hit by the new crown epidemic again and returned to strong control, and the economic and social operation was seriously affected, and it was not basically lifted until the end of the year. In addition, after the outbreak of the Russian-Ukrainian war in February, the international situation changed dramatically, and the United States led Western countries to increase the blockade and suppression of China, and China's economy faced great pressure, with a growth rate of only 3% that year. The United States fully relaxed epidemic control, accelerated the recovery of economic and social operations, and the economic growth of the year was 21%。The ratio of GDP between China and the United States fell back to 707%, essentially back to 2020 levels. First half of 2023, China's GDP increased by 5 percent year-on-year5%, which is not as large as expected**;U.S. GDP increased by 2 percent year-on-year4%, and did not expect severe stagflation;The GDP ratio between China and the United States fell further to 645%, down from 66 in 20191%(Changes in the ratio of GDP, in addition to economic growth itself, are also affected by changes in the exchange rates of the currencies of the two countries). This is far beyond the general expectations of the international community.
So,Why has the economic growth of China and the United States exceeded expectations since 2022?
This is closely related to the difference in economic structure and development momentum between China and the United States.
China's economy is dominated by manufacturing
Before the reform and opening up, China was a very closed huge economic depression in the world, with low income, low consumption, low output and low supply, and was in a state of serious shortage of supply. After the reform and opening up, people's enthusiasm for production has been released, especially relying on China's low cost and preferential policies, attracting overseas capital and production capacity to enter, promoting the improvement of labor productivity, enhancing economic activity, and accelerating economic development. Under the high degree of public ownership in the early stage, a large number of national resources were controlled by state-owned enterprises and institutions, a large amount of resource development income was concentrated in the hands of the state, and the level of private income and consumption was insufficient. After the outbreak of the financial crisis in Southeast Asia, China comprehensively deepened the reform of the housing, education and medical systems, greatly tapped the demand and development potential of related fields, and then successfully joined the WTO, attracting a large influx of international capital and production capacity, and promoting China's rapid development into the world's factory and manufacturing center.
After the outbreak of the global financial crisis in 2008, China promoted a large-scale economic stimulus plan, which not only made the economy take the lead in stopping the decline and rebounding, but also made great contributions to the world to curb the worsening and impact of the crisis, attracting more international capital and production capacity inflows, and then surpassed Japan to become the world's second largest economy and maintained an upward trend. However, in the face of global overcapacity and insufficient demand, the contribution of foreign trade to GDP growth has been declining, and in the case of insufficient external demand, domestic demand (investment and consumption) cannot support the huge production capacity, and investment growth has also been constrained, so that the economic growth rate has been declining since 2011, from 10 in 20106% has been down to 6% in 2019 (even without the COVID shock, it is entirely possible that economic growth will fall below 6% from 2020 onwards). In this process, in order to curb the rapid decline in economic growth, the state has continuously increased the stimulus of macroeconomic policies, and the debt ratio of the whole society has continued to increase, and risks and hidden dangers have continued to gather. From 2020 to 2022, the continuous strong fight against the epidemic will have a greater impact on economic and social operations and external affairs, and will also make the financial resources of enterprises, families, and enterprises a huge waste, and the social debt ratio will further rise. As the United States continues to strengthen its blockade and suppression of China and the international situation becomes more tense, external demand has been weakened even more, and domestic overcapacity has become more severe. From this,Exports, investment, employment and consumption have been constrained across the board, and social expectations and confidence have been impacted, resulting in increasing downward pressure on the economy, making it difficult to retaliate as sharply as in 2021**.
The U.S. economy is dominated by the service sector
Since the 1980s, the United States has promoted globalization, a large number of ordinary processing industries have moved out, and the country has become more and more concentrated in education, scientific research, military industry, finance and other high value-added cutting-edge fields, the service industry has accelerated its development, the real economy has become increasingly weak, the virtual economy has been continuously enhanced, consumption has become the main driving force of economic growth, imports have become the main consumer goods, and the deficit and financial surplus have grown. After the bursting of the dot-com bubble in 2000, it promoted the rapid development of real estate and financial derivatives trading in the United States, resulting in the subprime mortgage crisis and the full-scale financial crisis, which brought a huge impact on the American economy and society, forced it to implement large-scale economic stimulus and social assistance, and promoted global debt inflation and liquidity flooding.
After the outbreak of the new crown epidemic, the United States vigorously promoted social assistance, ** debt rose sharply, but the financial resources of the business and household sectors have not been greatly depleted by the epidemic, its consumption center is very high, and social demand is still strong. As the global industrial chain was deeply affected by the epidemic and the intensification of international contradictions, the inflation momentum in the United States continued to increase since the second half of 2021, forcing the United States to reverse its extremely loose macro policy in the previous period, reduce the rescue efforts and start raising interest rates rapidly. This has attracted a large amount of international capital to flow into the United States, promoting its economic development and growth. With the lifting of global epidemic prevention and control, the rapid recovery of import and export logistics in the United States, the rising momentum of inflation has been reversed, economic development and social employment have shown a good trend, and the expectation of a hard landing of the economy has been greatly improved.
China and the United States face different challenges
If foreign demand (exports) shrink rapidly (including foreign capital and foreign businessmen), domestic demand (consumption) is difficult to digest these capacities, forming a serious overcapacity, and will further affect investment (including infrastructure investment, real estate investment and industrial investment, etc.), employment and even population growth, which will inevitably form a huge pressure on economic growth, real estate and other assets will follow** The pressure of social debt and liquidity crunch will increase, and further affect the stability and growth of employment, income and consumption, resulting in the simultaneous stalling of exports, investment and consumption, and economic growth is bound to be substantial. It can be said that if external demand does not improve and a large amount of foreign capital is withdrawn, it will be difficult to remove the downward pressure on economic growth, and the impact will be very violent, and it will be difficult to reverse this situation even if extremely loose macroeconomic policies are implemented.
The United States does not have an overcapacity problem, and the demand for investment and consumption is enormous. In the face of global overcapacity, it is easier for the United States to expand imports or even lower imports**, and if it transfers a large number of imports from China to other countries, it is also easier to attract and win over relevant countries to strengthen cooperation and form alliances, so its economic growth is easier to improve, and the implementation of stimulus macro policies is more likely to be effective, and canIn the case of rapid and large interest rate hikes, it not only pushes the inflation rate from rising to falling rapidly, but also promotes faster economic growth, which seems to break the traditional conclusion that interest rate hikes will not only curb inflation, but also inhibit economic growth and even trigger stagflation
However,A high degree of vigilance is requiredAlthough the current U.S. economic performance is eye-catching, it will still take time and may cost the United States to decouple from China and rebuild the global industrial chain, and the high interest rate of the U.S. dollar will remain for a long time, which will have a profound impact on the development of the world economy. At the same time, the U.S. economy has been detached from real to virtual for a long time, and the debt and interest burden is very large and still expanding, and there are also huge risks and hidden dangers, once the debt crisis breaks out, it will have a major impact on its economy and society and even the international status of the dollar. In the face of the drastic changes in the world pattern over the past century, the United States is also facing tremendous challenges.
Respond to challenges proactively and prudently
Economic development, which is manifested in the joint growth of aggregate supply and aggregate demand, is jointly determined by the actual level of capital, resources, science and technology, manpower, etc., but is fundamentally determined by demand. If there is good demand, expanding investment can meet the production and living needs of the whole society, and can produce positive returns, it will attract more investment or promote technological innovation and efficiency improvement, thereby expanding supply, reducing costs, and promoting economic development, living improvement, and social progress. Blindly expanding supply in the absence of effective demand (including domestic and external demand) will lead to a greater waste of social resources and will inevitably inhibit or shrink social investment. At this time, even if the implementation of stimulus macro policies, including the expansion of ** debt and investment, is an overdraft in the future, it is impossible to form an effective and sustainable economic growth, and the stimulus effect will only deteriorate or be short-lived, accelerating the economic deterioration.
Despite the current economic growth under great pressure, China has formed the world's most complete industrial system and advanced infrastructure, with very large market potential and development space, technology research and development and product international competitiveness continues to increase, looking at the world, China is still in an important period of development opportunities. So,We must not only be highly vigilant against the current situation, be prepared for a period of sustained economic downturn, concentrated exposure of potential risks, and further intensification of international and domestic contradictions, but also strengthen confidence and determination, and actively and steadily respond to it。It is necessary to increase short-term macro policy stimulus, especially to do a good job in the relief and guarantee of difficult groups, increase consumption subsidies (give priority to consumption vouchers), and pay attention to relying on people's consumption to stimulate effective investmentAt the same time, it is necessary to accelerate the reform and opening up, especially to standardize the best behavior, enhance the fairness and authority of the rule of law, reduce administrative intervention in economic development, regional blockade, and departmental segmentation, promote the construction of a unified market and a fair and just business environment, fully release market potential and economic vitality, attract international investment and improve international relations with high-quality development, and win the initiative in the fierce international game.