《经济学人》2015年4月15日China's economy

原文

China's economy

Coming down to earth

Chinese growth is losing altitude. Will it be a soft or hard landing?

Apr 15th 2015 | ZHENGZHOU| Online extra

WHEN “60 Minutes”, an American television news programme, visited a new district in the metropolis of Zhengzhou in 2013, it made it the poster-child for China’s property bubble. “We found what they call a ghost city,” said Lesley Stahl, the host. “Uninhabited for miles, and miles, and miles, and miles.” Two years on, she would not be able to say the same. The empty streets where she stood have a steady stream of cars during the day. Workers saunter out of offices at lunch. Laundry hangs in the windows of the subdivisions.

The new district (pictured above), situated on the eastern side of Zhengzhou, a city of 9m in central China, took off when the provincial and city governments relocated many of their offices there. Then, high schools with university-sized campuses began admitting students, drawing families to the area. Last autumn one of the world's biggest children's hospitals opened, a gleaming facility with cheery colours and 1,100 beds. Chen Jinbo, one of the area’s earlier residents, bemoans the lost quiet of a few years ago. “Rush hour is a hassle now.”

The success of Zhengzhou’s development belies some of the worst fears about China’s overinvestment. What appear to be ghost cities can, with the right catalysts and a bit of time, acquire flesh and bones. Yet it also marks a turning-point for the Chinese economy. Zhengzhou still has ambitious plans, not least for a massive logistics hub around its airport. With such a big urban area already built up, though, vast construction projects

have a progressively smaller impact on the economy. The city’s GDP growth fell to 9.3% last year from an average of more than 13% over the preceding decade. The downward trend will continue. As the capital of Henan, one of the country’s poorest provinces, Zhengzhou had anchored the country’s last, large, fast-growth frontier. Its maturation signals that the slowing of China’s economy is not a cyclical blip but a structural downshift.

When growth flagged in powerful coastal provinces a few years ago, the poorer interior picked up the slack. It was large enough to do so, for a time. Henan and the other inland provinces that have a similar level of income per head have 430m residents, nearly a third of China’s total. If they were a sovereign country, they would form the world’s

seventh-biggest economy, ahead of both Brazil and India. The far west is China’s final underdeveloped region but it carries much less weight: it makes up less than a tenth of the national population.

So the question for China is not whether growth will rebound to anything like the

double-digit pace of the past. Instead, it is whether its slowdown will be a gradual descent—a little bumpy at times but free from crisis—or a sudden, dangerous lurch lower. Figures released on April 15th revealed a further loss of altitude: GDP in the first quarter grew by 7% from a year earlier, the lowest since the depths of the global financial crisis in early 2009. Signs of stress are emerging: capital is leaving the country, public finances are more stretched and bad debts are rising.

Yet that is not the full story. China also has impressive underlying strengths and a new determination to fix its most harmful distortions. “Growth will keep on declining,” says Xiang Songzuo, chief economist with Agricultural Bank of China, a state-owned lender. “Our main wish is that the decline go smoothly.”

Storm warning

The darkest cloud over China is its property market. Factoring in its impact from steel to furniture, it has powered nearly a fifth of the economy. Now, it is set to subtract from growth. House prices have fallen by 6% over the past year, the steepest drop since records began. It is not the first time that the property market has looked fragile, but previous dips were driven by deliberate policies to cool the market. In recent months, it has been the opposite: demand has failed to respond to a series of boosts such as cheaper mortgage rates. This has prompted predictions of a coming crash.

Problems are real but such disaster warnings rest on a misdiagnosis. The oft-heard idea that China is sitting on mountains of unsold homes is an exaggeration. Those making this claim point to the gap between property sales and construction. Sales of residential housing last year were 20% higher than they were in 2009, but projects under way have more than doubled since then, according to official data. If true, it would take five years to consume the pipeline of homes being built, up from three before the global financial crisis.