China\\\'s economic slowdown: Media reactions highly exaggerated, says IMF

China's devaluation, followed by knock-out in the stock market in the midst of its economic slowdown, became a global hot topic for free-for-all talk shows and news analyses that have apparently confounded the confusion. The contradictory conclusions drawn by different analysts and experts in the East and West from the same ongoing episode, however, have shown that what has been happening in China for quite sometimes now cannot be ignored as its economy has grown really big and being the so-called 'world factory' has, willy-nilly, integrated itself with the global economic systems.
There is no question of undermining what has been lately happening in China. China's currency devaluation and stock market 'meltdown' had wide ramifications in all corners of the world bringing down share markets in major economies, promptly creating an environment of 'global gloom" pushing the panic button.  Perhaps, it was inevitable. On August 21, Dow Jones industrial average suffered its worst loss in five years and the index dropped 5.8 per cent in the week. Analysts quoted asset managers and market operators as saying: "Right now there is a feeling of fear in the marketplace and all news is interpreted negatively and it's interpreted indiscriminately." On August 23, the Wall Street Journal complained of China's "wobbly crisis management."
There is a thin line between discretion and indiscretion and analysts sometimes tend to forget the maxim: 'Discretion is the better part of valour.' Some analysts in the face of panic allowed themselves to be swayed while interpreting the situation. BBC's Economics Editor Robert Peston opined: "Investors are in effect shouting that the era of so-called Chinese exceptionalism - that China can grow faster for longer than any other economy in history - is over, having become a dependent on recent years on debt-fuelled investment." On the other hand, Russian TV reported on August 25 the "biggest collapse in 20 years" of the Shanghai Stock Exchange Composite Exchange and quoted Bloomberg News analysts and Chinese officials: "It's panic selling and an issue of confidence" and then commented "The government won't step in to rescue the market again, as it's a global selloff and it's spreading everywhere now. It's not going to work now."
Likewise, BBC's China Editor Carrie Gracie on August 27 smugly ridiculed the Chinese government's intention of allowing market corrections to set "new normal". She sceptically suggested: "China's top political leaders have made no mention of the crisis, flagship mainstream media avoided touching on it and the government censors constrained discussion on social media within firm boundaries… The government has loudly committed itself to a 'new normal' which necessitates a range of painful but unavoidable market reforms." She commented in her punch line: "But no large authoritarian country has ever managed the move to high income status. So if China did achieve such a feat, it would be setting a precedent and making history."
However, in between the same period, International Monetary Fund's Managing Director and other IMF analysts separately offered to say that it was indeed a trying time (for China) but the media reactions were "highly exaggerated" and called for patience. IMF emphasised on reform measures for facing the situation.
Meanwhile, on  September 10, Chinese Prime Minister Li Keqiang while addressing the Summer Davos Forum in Dalian, China elaborated the country's economic situation and attempted to remove Western misgivings about the health and direction of China's economy. He said, "the ups and downs" in the economy may have firmed the shape of a curving wave, but asserted that the underlying trend remained to be positive. Despite slowdown in global growth, the seven per cent growth Chin achieved in the first half of the year was not at all easy. China's economic structure is rapidly improving and new economic growth areas are rapidly taking shape. China's economic development has benefited the world and its actual imports of commodities grew steadily. Outward investment has increased and over 100 million Chinese travelled last year and the number of visitors rose by 10 per cent in the first six months of the year. This has demonstrated the strong purchasing power of the Chinese people abroad. In this context, Li said that China contributed about 30 per cent to global growth and that world's second largest economy will not take a "hard landing."   
A more encouraging sign, Li pointed out, is that the Chinese economy is changing gears. Its vast manufacturing sector is upgrading and the economy is changing from relying heavily on investment to coordinated growth from both investment and consumption. Now the country's economy is more oriented toward consumption, which accounts for half of China's economic output and 60 per cent of growth. While economic growth moderated to 7.0 per cent in the first half, retail growth in China has risen more than 10 per cent so far this year. Household disposable income has also outstripped economic growth. In addition, employment growth exceeded 7.18 million during the first half of this year, or 72 per cent of the 10 million target set for the whole year. Besides, the central government's fiscal deficit, set at 1.12 trillion yuan ($175.5 billion) for this year, is low compared with other major world economies and there is great potential for the country's financial markets.
Li told his Dalian audience: "China still has a lot of tools to use in its innovative macro-economic adjustment policies and will continue to roll out targeted measures to counter downward pressures. I have repeatedly said that as long as there is adequate employment, a steady rise in incomes and an improving environment, slower or faster growth is acceptable."
British Finance Minister George Osborne, who was visiting China, expressed his confidence in China's economy and said on September 20 in Beijing that the country (China) was going through a necessary transformation and was "still a driver of global growth." News agency Reuters quoted him as saying at the beginning of his five-day China trip: "China is going through a very necessary and challenging transformation which is essential so that China's economy can go on creating good careers and good jobs and higher living standards for (its) 1.3 billion people. I think the message I would say to China is, carry on with the reform, carry on with the change you are making."    
While talking to Chinese technology executives in Beijing, Osborne said: "Of course there have been ups and downs. We've seen that through the summer. In our estimation the spillover effects, the impact of that on other financial markets has been relatively limited."
The Chinese PM's comments seemed to have created some impact in outside world as well. For example, Arancha Gonzalez, the Executive Director of the International Trade Centre, a joint agency of the World Trade Organisation and the United Nations, spoke highly of Li's speech. She said: "He (Li) acknowledged challenges and gave solutions. We can feel his confidence."
Likewise, Megan Walters, international director and head of research at Asia Pacific Capital Markets, said the (Chinese) government has sufficient tools in place to ensure a gentle transition from investment to consumption inside the economy. "So there is and will continue to be a rebalancing of the economy, and it will not be a hard landing," Walters added.
Chinese experts have also pointed out that China's economy is not a source of risk but a source of confidence, growth and opportunity, and an indispensable partner for global prosperity. Yang Tao, assistant director of the Institute of Finance and Banking under the Chinese Academy of Social Sciences, said the biggest risk in the global economy stems from the imbalance in development of different countries. Expectations over a rise in interest rates in the United States will reverse global capital flow, helping developed countries that are already in sound recovery but exacerbating conditions in emerging economies struggling to keep afloat, Yang said. On China's economic restructuring, he said that after temporary pains, it will not only improve the quality of the country's growth, but ease global imbalance, facilitate recovery and boost confidence.
Li Daokui, a well-known economist at Tsinghua University, commenting on Li's speech said that it highlighted the government's determination to keep the RMB stable, noting the recent adjustment will not lead to the export advantages predicted by some analysts. He said China has no need to rely on a cheaper RMB to boost growth as it has plenty of policy tools, such as financial innovation, untapped fiscal resources and other expanding measures.
Chen Fengying, director of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, said industrial cooperation satisfies the demands of countries in different stages of industrialisation. "Cooperation is in line with current globalisation trends and will be a major boon to world economic growth in the future," Chen said.
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