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Export-led growth will be limited in scope for China; dual circulation is ‘right direction’: DPM Heng

It will, however, take time to be fully implemented as it involves many aspects of the Chinese economy and society

 Crystal Heng
Published Fri, Oct 18, 2024 · 11:18 AM — Updated Fri, Oct 18, 2024 · 10:03 PM
    • DPM Heng says countries in Asia should continue to collaborate to realise the region's growth potential.
    • DPM Heng says countries in Asia should continue to collaborate to realise the region's growth potential. PHOTO: BUSINESS CHINA

    EXPORT-LED growth will be limited in scope for China in the coming years. Instead, dual circulation – which balances domestic consumption with international trade – is the “right direction”, said Deputy Prime Minister Heng Swee Keat at a conference on Friday (Oct 18).

    This will, however, take time to be fully implemented as it involves many aspects of the Chinese economy and society, such as the Asian mindset of saving. At the same time, China is also grappling with problems in the housing market and municipal debt.

    Heng, speaking at the opening of the FutureChina Global Forum held at Marina Bay Sands, noted that the recent measures announced by the People’s Bank of China that were aimed at stabilising growth are “timely”.

    Among the measures unveiled by the central bank last month were cuts to banks’ reserve requirement ratio and outstanding mortgage rates for individual borrowers, as well as liquidity support for the stock market through a swap facility.

    In the longer term, China also has to manage rising income and wealth inequality, and trade and technological contestation, he said.

    As a result, it needs structural reforms to overcome the limitations of its previous growth models, and make a transition to more inclusive and sustainable growth.

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    The deputy prime minister highlighted that many of these reforms are already under way, including reshaping the education system to put a value on not just college degrees but also vocational skills, as well as developing new industrial sectors in solar energy and electric vehicles, for example.

    “While China’s economy is going through a difficult patch, I trust that it will embark on difficult changes and regain its growth path to generate enough resources to deal with the many challenges it is already facing and will continue to face in the coming years,” he said.

    He also made the point that countries in Asia can and should continue to work together, to realise the region’s growth potential, while enhancing linkages with the global community.

    To do so, countries must develop their “hard infrastructure” and improve connectivity.

    Second, they must develop the “soft infrastructure” and nurture talent through education and training. And third, they must continue to pursue regional economic integration and deepen cooperation.

    For instance, discussions to upgrade the Asean-China Free Trade Area are near completion, and the Asean Digital Economy Framework Agreement is slated to be completed next year.

    This was the 15th edition of the FutureChina Global Forum, which attracted more than 700 attendees, including government officials, academics and business leaders.

    The day-long event featured sessions on issues such as regional economic cooperation, geopolitical developments, China’s policies, as well as the impact of artificial intelligence (AI) on new business opportunities in Asia and the region.

    Among the speakers were American investor Ray Dalio, Luckin Coffee’s chairman and co-founder Guo Jinyi, and former Indonesian trade minister Gita Wirjawan.

    Concerns about an orderly transition of power in US: Dalio

    Bridgewater Associates founder Ray Dalio was asked about the chances of the upcoming US elections’ results being contested.

    He replied that if Trump loses narrowly, the probability is almost even; if he wins, the story is different.

    Putting the two together, it would perhaps be a one-in-three chance. He also expressed concerns about whether there would be an orderly transition of power.

    On China, Dalio said it needs to get its debt restructuring done, which is “particularly challenging”, as the issue lies with local government debt and taxation, among other factors.

    He believes that China has the capacity and willingness to undertake these changes, citing the recent reforms by the central bank as “very good signs”.

    As for AI, Dalio said the US is ahead in some areas, while China is in the lead for others. For instance, generative AI is one area where China is “a bit behind”.

    On whether AI is helping to address China’s demographic challenges, he said he believes so, but noted that there is still a long way to go. The key is to have both AI and robotics, but there are some things they cannot do, so the challenge remains.

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