FCCJ Press briefing on Chinese economy

21/10/2015

1. Gist of the initial remarks by Mr. Ke Long
   
   
   • China risks are becoming real as seen in series of events including the explosion incident in Tianjin, plummeting Chinese stock prices, and devaluation of Yuan.
   
   
   • The short-term China risk is whether or not the government of China can lead its asset bubble into a soft landing. The long-term risks include 1) sudden policy decisions made by the administration, which usually causes shock due to its abruptness 2) environmental risks which can be a burden for economic development and 3) income disparity.
   
   
   • Chinese leadership sends their children to study abroad in countries such as UK and US. This is the evidence that they do not have assurance and confidence in future of their own country.


2. Gist of the initial remarks by Mr. Satoshi Tomisaka
   
   
   • The administration of President Xi now faces two problems. Firstly, the international community is suspicious about economic figures that the Chinese government announces and is concerned over the possibility of hard-landing of the Chinese economy. However, it is the path that every developing country has to go through. The international community is overreacting over the volatility and the Chinese economic situation.
   
   
   • Secondly, corruption of bureaucrats is widespread and social unrest will grow. The central government is aware of the problem and carries out anti-corruption campaign in a big scale than ever. The government also gives a harsh look on bureaucrats’ buying luxury items. Bureaucrats with vested interests are not happy about it and resisting through sabotage, which gives negative impact on the economy. Still, the central government cannot stop anti-corruption campaign, even at the risk of taking the economy hostage.
   
   
   • The above-mentioned problems are typical battles for an economy to develop from one stage to the next stage.


3. Q&A
   
   
   • (On recent economic volatility in China and its impact on Japan)

   It is understandable that Japan is concerned over economic situation in China. However, at the moment, the impact on Japan is limited (Mr. Tomisaka) China is in transition period economically while the international community should know and be ready that volatility will increase as an unavoidable part of it. (Mr. Ke Long)

   
   
   • (On equity market in China)

   It was good that the stock prices went down, as the prices had been going up with no grounds. The problem is that the government mediated halfway in order to stabilize the market. Moreover, the motivation to open the Shanghai stock market was wrong in the first place. It was established as a venue for state owned companies to procure fund, which is a wrong positioning of a stock market. Also, Chinese media such as People’s Daily and Xinhua News Agency should not make direct comments on stock prices. (Mr. Ke Long)

   
   
   • (On how serious the economic situation in China)

   Although the Chinese government has reported 7% GDP, the actual figure could be around 5%. However, we cannot jump to the conclusion that China’s economy is significantly bad. Unofficial/private economy has a big weight in Chinese economy and such private economy is not covered by the official statistics. Thus, it is difficult to tell how serious the economic situation is in China, by just looking at figures. (Mr. Tomisaka) The statistics announced by the government is not credible. However, it is meaningless to discuss what the actual number is, as there is no access to the original data. What is important is to know the economic trend in the country. (Mr. Ke Long)

   
   
   • (On recent Chinese diplomacy and Japan-China relations)

   The planned visit to US by President Xi is the most important diplomatic event for China. Since November last year, China has changed its course of diplomacy towards making proper relationship with US. In this connection, China has adopted a slightly different attitude towards Japan. China is surely showing some signs of improving ties with Japan but this is not the message directly addressed to Japan. China is doing so with the notion that Washington is looking at China. (Mr. Tomisaka) President Xi and PM Abe met on the sidelines of the Bandung Conference in April 2015. President Xi was already concerned about the economic situation in China and thus holding talks with PM Abe was a message from President Xi to Japanese business community. By demonstrating the improved Japan-China relations, President Xi was sending a message to the Japanese companies to stay in China and to continue business activities in China. Meanwhile, it was a good piece of news for China that there was no agreement reached over the TPP negotiations. President Xi might push US to join AIIB during his visit to US, with possibility of compromising transparency and governance issues associated with AIIB. If US joins, Japan may need to follow. (Mr. Ke Long)