南方财经全媒体记者施诗 上海报道

Chinese economy is maintaining recovery momentum. The official data showed China's GDP rose 4.9% in the third quarter. After the data was released, global financial institutions raised their 2023 growth forecasts for China's economy. So, will China's economy maintain a positive recovery momentum? What opportunities will high-quality growth bring to foreign companies? To answer these questions, SFC Markets and Finance interviewed John Ross, former director of economic and business policy for the mayor of London.

China's economy is reviving in multi-areas 

SFC Markets and Finance: The latest data was released. What are key takeaways from the data?

John Ross: I was extremely impressed by the recovery in tourism. Before I arrived, a couple of days ago, my friends were sending me photographs from the tourist locations because they looked almost dangerous. I don't mean seriously physically dangerous, but there were so many people there. And again, a friend of mine was going to see the terracotta warriors, but she couldn't get tickets. I know that's a bit anecdotal, but there seems to be very large numbers of visitors, etc.

SFC Markets and Finance: Besides tourism, what else have you observed?

John Ross: Well, the fact that the retail sales are recovering from what was extreme compression last year. So all the signs are really of recovering consumption. If you look at the main sectors of the economy, exports are not good, but I wouldn't expect them to be. The world economy is not in a good state of the present time. It's slowing down. There actually came quite significant problems in Europe, the economy is almost not growing in Europe. In the United States, they've got a financial problem. The profitability situation in the United States, and the investment problem is extraordinary serious. In the first six months this year, depreciation in US capital expenditure was higher than investment. So we have a paradox, which is, the world's number one capitalist economy wasn't actually produced any capital during the first six months of this year. So therefore the international situation is not good, then won't be good from the next year. So we can't have great hope from the point of exports.

SFC Markets and Finance: Actually, we all know that China's economy is shifting to high-quality. From your perceptive, how to define high-quality?

John Ross: These tempts are particularly high value added. That means going into sectors which adds a great deal of value in production. But again, that's particularly associated with technological advance, research and development, etc. But again, there is confusion about this. You can see people talk about innovation. Well, that's correct. You've got to have innovation. But innovation can't just be a good idea. You've got to embody this innovation in physical investment. When you had the development of the Internet, it wasn't just merely that the people had the good idea of the Internet. You had to create an entire Internet service in the entire economy. You had to have all the Internet carriers, all the work stations, all the infrastructure for the Internet. Now, a thing which is talked about a great deal for example, the artificial intelligence. That's absolutely correct. It's great. I use it all the time. And for some things of doing research, not to speak of more sophisticated uses can be bought. But that means you're going to have an entirely new chip sets. You're going to have entirely new types of computing capacity. You're going to have a lot of physical investment. And people seem to think somehow that innovation is just having a good idea. Well, that is no good at all. If you have a good idea, it'll stay in some of the university or in the research department. So the innovation has got to be embodied in capital investment. And this is the problem. China has got an economy which is rather balanced in the sense that approximately 40% of the investment is the state investment. That's going fine, that can be controlled by the government, but it's slightly under 60% investment in private investment. And that's not going well. And it's not going well for a simple reason because the profitability of companies has not gone up. So therefore the high quality development means You've got to have, one, a lot of expenditure on research and development, which is the government encourages very much. But then you've got to make it profitable to invest in the physical machinery, and the physical technology. And that's not being looked at enough. And there's a sort of confusion that people think innovation is just an idea, but it's not, it's got to be invested in some (practical areas).

The economy of China will continue to boost 

SFC Markets and Finance: In the Q3, the GDP growth of China is 4.9%. Did this match your expectation?

John Ross: At the present time, I would think it very slightly above the trend.  In the last four years, obviously every economy in the world has had problem because of the COVID-19. And now China has had much less problems than other countries. In the last four years, which cover the pandemic, China's economy grew in total by 19.2 %. The US economy grew by 7.5 %. And the Eurozone grew by slightly under 4 %. Now that means that China's economy grew two and a half times as fast as the United States and six times as fast as the Eurozone. In comparative terms, obviously means that China's economies doing much better than the United States and much better than the Euro Zone, It's just not doing as well as it was doing.

SFC Markets and Finance: Western media argues China's economy has peaked. How do you think about these comments?

John Ross: Well, I've been writing on China's economy for more than 30 years. In that time, every year somebody in the West predicts that China's economy is about to collapse. And then when it doesn't collapse, they say it's gonna happen next year. And then when it doesn't happen the next year, they say it's gonna happen the year afterwards. If you're on the advising companies business, it's simple. You get a one-year contract. If your projections turn out to be correct, they renew your contract. And if they turn out not to be correct, they don't renew your contract. That's fine. I lived for many years on 12-month contracts, because I got things accurately and had a very high renewal rate. And when people come on, and they say, China's economy is going to collapse. Well, if they were advising the company, they'd be sacked. But in this case, they continue to appear on the television. There's one guy in the West, who wrote a book saying China's economy goes collapse in 2001. That's more than 20 years ago. It hasn't collapsed and he still appears regularly as a China expert.

SFC Markets and Finance: So, do you think China's economy will fall into deflation?

John Ross: I wouldn't think so. I don't think deflation means falling if you mean consumer prices (CPI). Of course, the peak of PPI is already in deflation. I wouldn't think so slightly for technical reasons, because energy prices are going up. I would say if you look at the economy, I am in favor of a moderate stimulus. And by that I definitely don't mean the type of stimulus, which was after 2008. But I think the economy has grown slightly slower than it's possible. And let's say maybe half percent a year, or 1% a year, something of that type. So I personally would favor in light of all these factors, and particularly because the international situation is going to be bad, I would favor a moderate stimulus. During the COVID pandemic, its export situation was very good because a lot of countries had big economic problems. So, the economy got a boost during the last three years from export. That's not going to be the case. The export situation is not going to be very good this year, and that is the numbers so far this year confirming. Therefore, if you're going to have a bad external situation, you need a bit more domestic stimulus. That would be my view. Again, I want to be very clear, not a 2008 type, gigantic stimulus, but a bit more stimulus is what I would think. Maybe say aiming to get the rate grow, I think you can get the growth rate of the economy up by half a percent or 1%, something of that type.

Foreign companies will maintain their invesment in China 

SFC Markets and Finance: To further maintain its momentum in economy, Chinese government took many actions. So how do you comment on these actions?

John Ross: Well, overall, I think that they're good. You're getting loosening of monetary policy. The level of state investment continues to be very reasonable. That's no problem. Perhaps you could have a bit more infrastructure investment. Because it's a myth that China has got enough infrastructure. It's just not true. If you take per capita, China still got much less infrastructure than the United States, in terms of roads per person, railways per person, power supply per person, etc. which are well below the US level. You could have a bit more of that.

SFC Markets and Finance: Despite the Western Countries' push for a decoupling from China, multinationals still invest in China. How do you think about this trend? What are multinationals looking for from China?

John Ross: Rapid growth of its economy so that they can make profit. That's very simple. That's what they want. therefore, they're not immune from the question of what is the profitability level in the economy? The United States gained a whole lot from rhetoric. I've seen it before. What they're trying to say is, don't invest in China. Go and invest in India. That's really what they're doing. The re-shoring as it's called, there is getting manufacture back in the United States has been a total faliure. The manufacturing in the United States hasn't even regained their level, its previous peak level. So that's been an absolute failure. All the reports that came out from people like the Boston consulting group, that there was going to be re-shoring, and there was going to be big investment in manufacturing in U.S. It's all nonsense. It's not going to happen, because the cost level is too high in the United States. So therefore, the companies are going to invest in a developing economy, or that is, apart from some very high tech companies, which will stay in the US. In the past, what they've done is they've been invested in China. So what the United States is trying to say is, don't invest in China. Invest in India. That's really all the propaganda. If you read the Western material they're all about how wonderful India economy is, etc. But the problem is it's not really true. So because India's infrastructure is not so good, India's communication system is not so good, and there's no point in having a good factory with cheap labor if you can't get its products to ports, if you haven't got a power supply that allows it to run all the time, if you don't have trained labour that can run it, etc. And that's why the companies are not really decoupling from the situation in China. 

What is the case, of course, is that they look at the domestic economy of China and see how that's great, because this is the change compared 20 years ago. 20 years ago. Foreign companies invested China basically to export. They weren't interested in China's domestic market. They wanted to use as an export base. It's true that the exports for foreign companies are still very important in China, but it's been replaced now by the domestic market within China. So really what they're going to look at is how fast China's domestic economy grows. And although China's economy has grown a bit more slowly than it was in the past, so to say, if we take the last four years, China's economy still grown two and a half times as fast as the United States and six times as fast as Europe. Therefore, companies will continue to invest here.

SFC Markets and Finance: As we discussed before, high-quality has become the theme for China's economy. So, what opportunities will high-quality growth bring to foreign companies?

John Ross: Well, firstly, because they will continue to have an advantage in very high technology. China has now got a situation. It's not merely got one very high technology company, For example, Huawei, everybody used to just discuss Huawei, because that's the world's most efficient telecommunication company. Everybody spent their time discussing one company, because China only had one company that was leading. But now it's getting much more there. Hikvision is the best producer of cameras, as surveillance cameras for traffic, for security, and etc. in the world. And TikTok has now become a sensation. Ten years ago, people used to say China can't develop brands. Okay, it's true. China is good at assembly things. China can assemble the iPhones or something, but it can't produce a brand. Well, that looks ridiculous now because TikTok has now become the world's most visited website. And you got a problem in the United States,Trump wanted to ban TikTok, and some people in the United States want to ban TikTok. But Tiktok has 120,000,000 Americans found, and it was very nicely put on the American TV broadcast. You think carefully before picking an argument with 120 million people. And so therefore, although there's been a lot of talk about banning TikTok, they've never actually banned TikTok. 

Now with EV vehicles, for example, BYD is now going to overtake Tesla as the world's biggest manufacturer of electric vehicles. And if the United States and Europe want to make the switch to electric vehicles, and they want to cut China's car companies out. Then they're going to raise the prices and they're not going to raise the prices of electric cars by a few hundred dollars. They're going to increase the price of electric cars by thousands and thousands of dollars. And that's going to make the switch to electrical vehicles much less efficient. It's going to grow unpopularity amongst the population. And this is because China is going from the situation of having one or two leading companies in the world in high technology to having 20 to 30. But nevertheless, there are still areas in which the US companies, are still much more high-tech than China.

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