China a key 'stabilizer' for global economy
Country can sustain supply chain, rein in inflationary pressures, expert says
China, with its stable supply capacity and rising manufacturing productivity, can be a "stabilizer" for the global economy as geopolitical conflicts send oil prices zooming and raise inflation fears, a senior Chinese economist said.
On the demand front, China has made significant progress in boosting consumption and investment, while further efforts are needed to lower financing costs and strengthen livelihood support for migrant workers and young graduates, said Zhang Bin, deputy director at the Chinese Academy of Social Sciences' Institute of World Economics and Politics.
"China is the biggest stabilizer for price, as without China, global manufacturer prices will be totally different," Zhang said in an exclusive interview with China Daily.
Zhang, who is also a member of the National Committee of the Chinese People's Political Consultative Conference, made the comments as the global economy is facing increasing turbulence due to conflicts and supply disruptions. Brent crude, the global oil benchmark, surged above $110 per barrel on Monday, as supply disruptions in the Middle East rattled energy markets.
Against such uncertainty, China's manufacturing sector is poised to continue providing reasonably priced products for the global supply chain, given the sector's stable productivity growth, thus helping anchor global inflationary pressures, Zhang said.
China's key role in stabilizing the global economy is making renminbi-denominated financial assets more attractive to global investors, he added.
Marshall Mills, the International Monetary Fund's senior resident representative in China, said the country contributed about 30 percent to global economic growth last year.
"Strong growth in China will continue this substantial contribution," said Mills, adding that bolder reforms to boost domestic consumption would make growth more resilient.
Zhang said China has made notable progress in expanding domestic demand since late 2024. Stronger stock market performance, a firmer renminbi exchange rate and stabilization in total social financing all indicate improving expectations and confidence for demand expansion.
However, real-economy indicators such as growth in consumption and investment remain sluggish, Zhang added.
"Combining all the information together, I will say the Chinese economy is at the early stage of recovery. We still need to wait for the confidence to be translated into more investment, income growth and consumption."
For consumption in particular, Zhang said his research shows that more than 80 percent of China's household consumption growth can be explained by changes in nominal GDP growth, with income distribution and propensity to consume playing a smaller role.
For investment, he said the challenge is that some private enterprises see relatively low profit margins in making investments, or that the overall return on assets compared to financing costs remains limited.
All these factors point to the need to strengthen counter-cyclical adjustments, including a more proactive fiscal policy and more "brave" monetary easing moves, including interest rate cuts, he said.
Further rate cuts, on the one hand, could improve the profitability of investments and spur more private investments. On the other hand, asset valuations would be further improved, helping households repair their balance sheets and strengthening their spending power, Zhang said.
"To increase household consumption, counter-cyclical adjustments would be the number one, or the most important, policy choice," he said, adding that reforms should also be advanced to improve income distribution.
Zhang suggested local governments take more active measures to retain young graduates and migrant workers and help them settle down with families by improving their access to housing, education, healthcare and elderly care services.
Providing tax incentives or fiscal support for such services could expand the tax base and generate long-term economic returns, said Zhang, who also suggested lowering entry barriers in such sectors to encourage greater participation from private and social capital.
