China still rising, says U.S. Foreign Affairs Magazine

BEIJING, April 3 (Xinhua) -- The dismissive view of China already peaking as an economic power actually "underestimates the resilience of its economy" and the fact is that the country "is still rising," the U.S. Foreign Affairs Magazine said in an article published Tuesday.

"While its growth has slowed in recent years, China is likely to expand at twice the rate of the United States in the years ahead," said the article titled "China is still rising -- Don't underestimate the world's second-biggest economy."

Although China faces several well-documented headwinds, including a housing market slump, restrictions imposed by the United States on access to some advanced technologies, and a shrinking working-age population, the country overcame even greater challenges when it started on the path of economic reform in the late 1970s, it said.

Citing substantial figures, the article refuted several misconceptions that undergird the pessimism about China's economic potential one by one.

On the misconception that the Chinese economy's progress in converging with the size of the U.S. economy has stalled, it pointed out that the two transitory factors, inflation and interest rates, have impacted the gap change between the two countries during the past few years.

"The International Monetary Fund forecasts that Chinese prices will pick up this year, which would boost China's GDP (gross domestic product) measured in renminbi. Its nominal GDP measured in U.S. dollars will almost certainly resume converging toward that of the United States this year and is likely to surpass it in about a decade," it said.

On the second misconception that household income, spending, and consumer confidence in China is weak, the article said that Chinese households did just the opposite last year: consumption grew more than income, which is possible only if households reduced the share of their income going to savings.

On the third misconception that price deflation has become entrenched in China, putting the country on course toward recession, the article said the fact is that Chinese corporations ramped up borrowing, both in absolute terms and as a share of GDP. Also, investment in manufacturing, mining, utilities, and services increased. No recession appears on the horizon.

"China will likely continue to contribute about a third of the world's economic growth while increasing its economic footprint, particularly in Asia," said the article, warning U.S. policymakers that if they underappreciate China's development, "they are likely to overestimate their own ability to sustain the deepening of economic and security ties with Asian partners."