Andrew Polk, the co-founder and head of economic research at Trivium China, a Beijing-based strategic advisory firm, and a senior associate (non-resident) of the Freeman Chair of China Studies at the Center for Strategic and International Studies addressed the WSCRC Board at its quarterly Board meeting on May 27th. Andrew discussed China’s macroeconomic growth policy framework from the short term, medium term and long term perspectives, which are driven by the key goals of the two sessions, the dual circulation, and the 14th five-year plan respectively.
Andrew presented a contrarian view of the commonly acknowledged short term growth of the Chinese economy, predicting that Chinese leaders would like to slow GDP growth but not to take “sharp turns”. Andrew noted that credit cycle, a key economic growth determinant of China’s economic growth, should be basically in line with potential nominal GDP growth. He suspects that credit growth, which had been expanding at approximately 13% p.a. would be dialed down to 10% per annum by the end of the year. Andrew believes that with China limiting the growth of its credit markets that the drivers of global growth in 2022 will be the U.S. and European economies as they rebound from their Covid slowdowns. He mentioned that will make for tougher times for companies operating in China as opportunities develop in other markets.
For the medium term growth that’s driven by the dual circulation framework, the principle is to reduce external demand and increase domestic demand. Andrew argued that if this policy framework is effectively and fully executed, it could fundamentally reshape global trade and investment flows and could be seen as part of China’s own plan for decoupling. Andrew also listed and commented on several key goals of dual circulation as articulated by economist Yu Yongding.
Andrew noted that the policy setting for the long-term growth in China is the 14th Fiver-Year Plan (FYP). There are three overarching themes of the 14th FYP – national economic security, innovation and tech self-sufficiency, and transitioning to greener growth. Both the U.S. and China see green tech as a key competition area and this is where companies should focus on.
To see Andrew’s presentation please click here.