China remains world's largest economic driver

Updated 2017-01-23 09:56:30 Global Times

Country's growth underpinning expected global recovery: IMF

China posted a 6.7 percent annual GDP growth rate in 2016, the National Bureau of Statistics said on Friday. Experts noted on Sunday that the Chinese economy remains the single largest contributor to world GDP growth and that the country will retain that role in the decade to come.

"Despite some differences in economists' calculations, it is agreed that about one third of world growth is contributed to by China. China remains the single largest contributor to world economy and global economy will suffer greatly should Chinese economy encounter major hurdles," Liao Qun, chief economist with China CITIC Bank in Hong Kong, told the Global Times Sunday.

In an August 2016 Project Syndicate article, Stephen S Roach, former chairman of Morgan Stanley Asia and the firm's chief economist suggested that if China achieved a GDP growth rate of 6.7 percent in 2016 that would account for 1.2 percentage points of world GDP growth in the year. Based on the 3.1 percent growth rate expected by the IMF, this would mean that China would contribute to nearly 39 percent of total world growth.

Roach noted that based on these predictions, China's share of global growth would dwarf the contribution of other major economies.

"For example, the U.S., widely praised for a solid recovery, has its GDP expected to grow by just 2.2 percent in 2016 — such a growth is enough to contribute just 0.3 percentage points to overall world GDP growth, or only about a quarter of the contribution made by China," Stephen S Roach said.

"From 2011 to 2015, China's economic growth contributed over 25 percent to the global economy and China has become the most important engine of the world economic growth," according to an article posted on the government's website on January 16.

"Contribution is associated with the economy's size and its growth rate. The Chinese economy is smaller than that of the U.S. but grew at four times the speed of the U.S. economy, making much more contribution to the world economy," Liao said.

The Indian economy, which grew at similar pace with Chinese economy, is only one fifth the size of China's. So its contribution is about one fifth of that of China's," noted Liao.

Lasting trend

In the next decade, China will remain the world's largest contributor to growth, Liao said.

In the latest update of the IMF's world economic outlook, published on January 16, China's GDP is forecast to grow at 6.5 percent in 2017 and 6.0 percent in 2018. Meanwhile, the US growth predictions are set at 2.3 percent for 2017 and 2.5 percent for 2018.

Global growth projections by the IMF stood at 3.4 percent for 2017 and 3.6 percent for 2018, which will be an increase from a 2016 estimated rate of 3.1 percent.

China's growth upgrade for 2017 is a key factor underpinning the coming year's expected faster global recovery, the IMF said.

"Not without some headwinds, the Chinese economy will have an L-shaped trajectory, having a growth rate of around 6.5 percent, for the next five years, powerfully supporting the world economy to grow in the range of 3.0 percent to 3.5 percent," Liao said.

Continuing rapid credit expansion, impaired corporate debts, and persistent government support for inefficient State-owned firms are highlighted by the IMF as causes to a potentially sharp or disruptive slowdown in Chinese economy in the future.

Liu Xuezhi, a senior analyst at the Bank of Communications, said that it is difficult to say whether a fast recovering U.S. economy will challenge China's role. "With two variables, it is difficult to predict which country might surpass China in terms of economic contribution to the world, but if a mid to high growth rate is to be maintained, I would say at least by 2020 China's No.1 position will stay unchallenged," Liu told the Global Times Sunday.

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