The world once again embraced the Boao Forum for Asia (BFA): Its 2016 annual meeting was held from March 22 to 25 in Boao of Qionghai, Hainan Province. In attendance were Chinese Premier Li Keqiang and state leaders of more than 10 countries, as well as some 300 guest speakers and 1,700 delegates.
The 15-year-old BFA has risen alongside China’s rapid development and addressed global concerns of the economic crisis as well as exploring market transformations in the aftermath. Themed “Asia's New Future: New Dynamics and New Vision,” almost every topic at this year’s BFA included the word “new,” evidence of an exciting time with developments in entrepreneurial approaches and innovation, especially the internet+ and advances in macroeconomics. AlphaGo’s victory over Lee Se-dol turned out to be one of the buzzier topics at the Forum.
Over the past two years, China’s economic “new normal” has triggered doubt around the world. The global market has placed its focus on China and the economic downturn of 6 percent in growth pace: Global economic sectors that depend on China suddenly lost their driving force. The result has been anxiety in global markets, particularly in the West.
Western countries have been worried about China’s long and stable, yet speedy economic growth. Many analysts have expressed hope to see China’s economic clout, which is reversing the global economic order, diminish. However, global markets have come to rely on China’s rapid economic growth (which has contributed over 50 percent of global economic growth) even more after the global economic crisis spread from America and Europe.
As a result, China’s economic “new normal” has become a contradiction between domestic self-confidence and foreign query, which assumes that China is declining economically because of volatility in stock and foreign currency markets. George Soros haughtily short-sold the RMB only to lose, and Moody’s dubiously downgraded China’s sovereign credit rating.
After the lengthy economic recovery of the United States, the Federal Reserve dropped quantitative easing to raise interest rates, which bothered the global market. Today, Fed’s interest rate hikes have slowed.
Prior to this year’s NPC and CPPCC annual sessions, China was rocked by extraordinary chaos in its stock and foreign currency markets. The situation worsened when the real estate market was struck by sluggishness and “indigestion.” Nevertheless, Beijing sent the world an explicit signal during the G20 World Policy Conference and the Two Sessions that China can keep the RMB at its current value and maintain stability of the stock market through systematic reform and well-organized supervision.
Data shows that the stock markets in Shanghai and Shenzhen have rebounded from the downturns. Of course, many moving parts influence these markets, but overall, they are settling down. The RMB, for instance, has achieved steady growth after implementation of exchange rate reform in August 2015.
Stock and foreign currency are the most visible indicators of the Chinese market. When they are chaotic, the “new normal” is seen as a new crisis. When they are stable, the global market quickly regains their faith in China’s economy.
Domestic investors look at real estate along with the rises and falls of the stock market. When the stock market is stable, medium and smaller investors are more confident, inspiring the formation of reasonable reform measures by supervisors of the capital market, which can be accelerated at its convenience.
“Sluggishness” in the first- and secondtier cities and stagnation in the third- and fourth-tier cities happen simultaneously along with differentiation of the real estate market. Along with adjustment of policies, attention should be placed on the behavior of investors, who often make irrational moves in hopes of quick payoffs. A major concern for policy makers is preventing such risky investment through policy guidance and market allocation.
Reform isn’t to blame for tough market issues during China’s structural adjustment to “new normal.” Rather, these issues are the result of irrational investing. The challenge for policy makers is to get medium and small scale investors who tend towards market speculation to invest more wisely.
The BFA hopes that elites from the political and commercial circles around the world will build faith in China’s economic “new normal.” It also aims to inspire innovation and originality to be deeply rooted in China and Asia and to breed new economies around the world and help them thrive on new platforms of internet+ and +internet, so that the economies of China, Asia, and the world can reach a new era.
The author is a researcher at the Chahar Institute.