China's economic outlook: Looking ahead

In January of every year, Western commentators – mostly economists predict to the effect that "the great days of China's growth are drawing to a close and decline, if not a crash, is at hand". Books written over the years have predicted impending disaster. "The Coming Collapse of China" by Gordon C. Chang in 2002 and "The Writing on the Wall – China and the 21st Century" by Will Hutton in 2017 are just two examples. Those predictions turned out to be different from the subsequent reality. Some recent commentators – not all of them economists, have offered different views."Created in China – How China is becoming a Global Innovator" by Georges Haour and Max Von Zedwitz and George Magnus with "Red Flags" have offered more thoughtful assessments which have also taken into account the crisis confronted by Western democracies in directing our thinking beyond previous simplistic pigeon-holing approaches to categorising entire political and cultural systems in ways suggesting absolute superiority or inferiority. Governments around the world, not least in UK, are largely in disarray and struggling not just with economic issues, but much broader and bigger challenges in an age of unprecedented scientific and technological progress. Many agree and are writing books about "democracy (whatever we think it is) in crisis". It is positive therefore to read a leading article in China Daily on "The Resilience of the Chinese Economy" – which looks ahead optimistically to a year of continued economic progress in 2019 at a point in time when the latest figures for 2018 GDP show 6.6 percent growth. The "doomsayers" point out that this is the slowest growth for some years, but it is in reality right in line with the Chinese governments consistent predictions we have received throughout the year, and should be seen as a positive achievement given the slowdown in world economic growth and the tensions affecting the world trading position in some sectors and regions. Here are three paramount observations which support appropriate degrees of optimism. It may be that "honesty and realism" are better descriptors.

First, China has a clearly stated and consistent long term strategy and plan for National Development on all appropriate fronts not simply in terms of economic measurement. It is easy to take cynical view of "The China Dream" and "Socialism with Chinese Characteristics". But China's leadership is manifestly consistent in espousing a very clear vision for the future backed up by clear and ambitious – in some ways courageous – practical programmes to make things happen, such as the Belt and Road Initiative. China's engagement in many international institutional activities and President Xi Jinping's commitments to globalization and collaboration as way forward are well articulated and open for the world to see. Nothing secretive about China's ambitions and determination to excel in many ways.

Second, the real evidence that China has become an "Innovation Nation" is that it continues to increase investment in R&D and in specific fields such as computer science, artificial intelligence, machine learning as well as areas of bioscience. The other example of companies founded in China which have become leaders in fields such as telecommunications through their ability to turn research and knowledge into products and companies is Huawei. Huawei's leading position in telecoms has caused alarm in the West – leading to concerted attempts to impede its growth which have roots not only in the expressed fears about national security issues. Geopolitical considerations are at work here. Economic development and stability only reflect the whole gamut of issues and activities which determine how a nation performs on a broad base.

Third, China has a population of more than 1.3 billion. 750 million have been lifted from poverty to a better life in the 40 years since Deng Xiaoping initiated "The Great Reform and Opening-Up". Indeed, we recently celebrated the 40th anniversary of that profound set of decisions which changed the world, not just China. The Chinese domestic economy is clearly an effective buffer which can protect the economy from hard times worldwide. It has a new and growing generation of young and highly educated worldly wise people, generally full of hope for the future and willing to work to make it successful in their own way. It is but a short step to connect the comments in the preceding section with ways in which the new generations are finding effective applications for new technology in particular – as the Chinese economy becomes more focused on domestic and less on the export growth which has been the mainstay of the past 10 years of economic development. The growth of the service sectors in the Chinese economy has been driven largely by imagination (which Einstein repeatedly reminded us is "more important than knowledge") and innovative initiatives related to social media – in very different ways than we have seen these increasingly important and influential media channels used in the West.

The way ahead then, despite aspects of global slow-down, decline and international tensions, shows strong indications of a continuing positive role for China as the most significant contributor to world economic growth. There will be significant challenges and uncertainties. But a nation that has just managed to land a spacecraft on the far side of the moon is a nation now very much a world leader in more general ways. Imperfections, of course, like every other nation. But the evidence in hand supports prospects of a solid period of consolidation ahead as we approach the celebrations accompanying the Chinese New Year.

The author is a professor at the University of Cambridge in England and also has appointments at four Chinese Universities and is a director of Chinese and UK companies.