[China’s,Economy,Won’t,Rebound,from,Bottom,Soon]China from above

　　When the data of China’s economy in Q2 was published, many experts and professional institutions declared that the economy would rebound after hitting the bottom in the following quarter. They describe the economic situation of China this year as a V-shaped pattern. However, the economic data in July almost crashed their optimistic thoughts. The data in August expected no good turning. Even Premier Wen Jiabao said:“The economic trouble might last a while.”
　　For this issue, Xiang Songzuo, chief economist of the Agricultural Bank of China and deputy director of the International Monetary Institute at the People’s University of China, wrote down his own opinions:
　　Now the situation is very clear. We do underestimate the severity and duration of the economic slowdown in China. That’s because we do not realize how weak the domestic demand of China and its influence over Chinese economy are. We also do not prepare well for the European debt crisis, American debt problems and slow global economic recovery. Then, we underestimate the problems caused by de-leveraging, debt inflation, balance sheet inflation and deviation of virtual economy from real economy. Lastly, we do not make full estimation about the hegemony of the US dollar the result of the monetary policy of quantitative easing.
　　Here I made out four fundamental estimations: one, the international environment for China’s economic growth has apparently deteriorated as the four major risks are gradually going up; two, the internal driving force for China’s economic development is greatly weakened; three: the deteriorated external environment and weakened internal driving force lead to the obvious decrease in the effect of macroeconomic adjustment and control, say, the traditional monetary easing and fiscal stimulus won’t function as well as before; four, the only solution is the deepening of the reform to economy and political system – the breakthrough of the reform lies with the government and the key is to reduce the government power, standardize the government rights, neutralize the government’s influence, control the government cost and cut down the government size. We cannot evade or bypass the reform to the political system.”
　　“Concretely speaking, the deterioration of the international economic and political environment is represented by the four rising major risks internationally. They are respectively: a), the debt crisis and the recession of economic economy, b), the increasing food crisis and energy crisis, c), the spread of protectionism, conservatism and“de-globalization” and d), the increasing geopolitical crisis.”
　　Xiang Songzuo paid close attention to the risk of the feeble economic recovery of the world and the continuous recession.
　　As he said, the European Central bank just lowered the anticipation for the economic growth of the Euro Zone. In 2012 this area would meet a 0.3% decrease in economy and the growth in 2013 is so tiny (0.6%) that it cannot offset the bad situation in 2012, though the economic growth rate of Euro Zone is expected to go up to 1.4% in 2014. The unemployment rate in Euro Zone will be as high as 11.2% in 2012 and the figure is to increase to 11.4% in the following year before falling down to 10.8% a year later. “In the time of uncertainties, forecasts are not reliable and the real outcome might be even worse,” Xiang Songzuo said.
　　
　　“Italy was hit by the negative economic growth for four straight months and its economy in H1, 2012 ended up with a 1.1% negative increase. Spain was a little better than Italy as its economic growth in H1 was -0.4%, which doomed it in the second recession. The GDP of Greece had a 6.2% decrease in the second quarter after the 6.5% decrease in the first quarter. This South European country’s GDP dropped over 30% in recent five years. Germany, which serves as the most important engine for the Euro Zone, also went through a dramatic decrease in economic development recently. From the first quarter of 2011, Germany’s year-on-year economic growth rate dropped from 4.9% to 1%. The quarter-on-quarter increase in the second quarter of this year is only 0.3%, which was accompanied by the poor 1% year-on-year increase. The importation to countries outside the Euro Zone is the main driving force for the German economy but it is forecasted to have a slower growth in the second half this year. Then, Germany’s neighbor France was having a bad time too as its unemployment rate increased to 10%.
　　The US is the only highlight among developed economies. As Xiang Songzuo pointed out, the US economy indeed had a substantial recovery, proving the systematic flexibility and self-recovery ability peculiar to the US economic system. But it is also true that the US economy is suffering from a lowered economic growth rate.
　　The US Federal Reserve has already decreased the forecast of US economic growth rate in 2012 from 2.4% to 1.9%. At the end of August, the US Council’s Budget Office warned that the US economy might be trapped by recession again. Presently there are three major problems haunting the recovery of US economy: the high unemployment rate, the shrinking residential property market and the advent of “fiscal cliff”. Sadly, the economic stimulus package featuring financial measures have quite limited effect.
　　Apart from the Euro Zone and America, the Japanese and British economy is hard to rise too, and the economic growth rate in emerging market is also decreased. There, many international institutions lowered the forecast about global economic growth and revealed their pessimistic opinions towards the global economic outlook.
　　The trade data in July reflected the negative influence of slowed global economic recovery on the Chinese economy. In that month the total imports and exports volume, imports volume and exports volume respectively had a 1.4%, 1.6% and 1.2% increase year on year. The SinoEuropean trade volume had a negative increase in the first seven months of this year, which has not been changed since the breakout of the European debt crisis. The Sino-Japanese trade volume also had a decrease. The only reassuring data is the trade volume between China and ASEAN and between China and the US. The former was 22.057 billion US dollars, up 9% while the latter increased by 10.5% to 271.4 billion US dollars.
　　But Xiang Songzuo worried that the figure would not be maintained at this level as the economic growth rate of the US and the world is decreasing. This will further deteriorate the situation for China’s exportation.
　　However, the biggest challenge for China’s economy is not the deterioration of external environment. The waning internal driving force is the one to be mainly blamed. It mainly includes four aspects: the obvious decrease in total factor productivity, the apparent decrease in the efficiency of capital credit utilization and the capital flow rate, the apparently weakened effect of macro policies and the decreasing confidence of investors in the future.
　　“Therefore, I do not think the Chinese economy will rebound from the bottom in a short while,” Xiang Songzuo said.

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