Table Of ContentCurrent Chinese Economic Report Series
Center for Macroeconomic
Research of Xiamen University
China’s
Macroeconomic
Outlook
Quarterly Forecast and Analysis Report,
February 2017
Current Chinese Economic Report Series
The Current Chinese Economic Reports series provides insights into theeconomic
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Center for Macroeconomic Research
of Xiamen University
’
China s Macroeconomic
Outlook
Quarterly Forecast and Analysis Report,
February 2017
123
Centerfor Macroeconomic Research
of XiamenUniversity
Xiamen, Fujian
China
Grants: the major projects of China National Social Science Foundation (15ZDC011,
13&ZD029), the major research projects of philosophy and social sciences of China’s
Ministry of Education of China (16JZD016, 15JZD016, 14JZD011), the key research pro-
jectsoftheKeyResearchInstitutionsofHumanitiesandSocialSciencesofChina’sMinistry
of Education (14JJJD790007, 14JJD790015, 15JJD790029, 16JJD790031, 12JJD790027),
the general project and the youth project of China National Social Science Foundation
(15BJL008,13CJL017),theyouthprojectofChinaNaturalScienceFoundation(71503222).
ISSN 2194-7937 ISSN 2194-7945 (electronic)
CurrentChinese EconomicReport Series
ISBN978-981-10-6122-6 ISBN978-981-10-6123-3 (eBook)
DOI 10.1007/978-981-10-6123-3
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Preface
This report is a partial result of the China’s Quarterly Macroeconometric Model
(CQMM), a project developed and maintained by the Center for Macroeconomic
Research (CMR) at Xiamen University. The CMR is one of the Key Research
Institutes of Humanities and Social Sciences sponsored by the Ministry of
Education of China, focusing on China’s economic growth and macroeconomic
policy. The CMR started to develop the CQMM for purpose of short-term fore-
casting, policy analysis, and simulation in 2005.
Based on the CQMM, the CMR and its partners hold press conferences to
release forecasts for China’ major macroeconomic variables. Since July 2006,
twenty-one quarterly reports on China’s macroeconomic outlook have been pre-
sented and twelve annual reports have been published.
This 22nd quarterly report was presented at the Forum on China’s
Macroeconomic Prospects and Press Conference of the CQMM on February 22,
2017. This conference was jointly held by Xiamen University and Economic
Information Daily at Xinhua News Agency.
Xiamen, P.R. China China Center for Macroeconomic Research
at Xiamen University
v
Acknowledgements
According to the Chinese Pinyin of their names, the 113 experts who joined this
questionnairesurveywere:PeiwenBo,YongzuBian,XinChang,ChangbingChen,
Gong Chen, Jianbao Chen, Kunting Chen, Langnan Chen, Lei Chen, Menggen
Chen,ShoudongChen,XuebinChen,YanbinChen,YongjunChen,ZhiyongChen,
Kuizao Dai, Xiang Deng, Ximiao Dong, Conglai Fan, Ziying Fan, Bo Gao, Qiang
Geng, Qiyou Guo, Xibao Guo, Xiaohe Guo, Zhiyi Guo, Han Zhaozhou, He
Jingtong, Huang Jianhui, Huang Xianhai, Erh-cheng Hwa, Xinhua Jian, Yongmu
Jiang, Xiangrong Jin, Tao Jin, Chunqi Li, Jianwei Li, Jun Li, Xuesong Li,
Yingdong Li, Zhijie Liang, Xuegui Lin, Fengliang Liu, Jianping Liu, Jinquan Liu,
ShiguoLiu,XiahuiLiu,YunzhongLiu,ZhibiaoLiu,YingMa,JinjuPang,Su-ling
Peng, Chongming Qiu, Wan-wen Chu, Ruoen Ren, Yihang Shao, Danyang Shen,
Jinchuan Shi, Junyi Shi, Jian Su, Wei Sun, Jijun Tang, Changyun Wang, Cheng
Wang,DashuWang,GuochengWang,HongjuWang,JipingWang,MeijinWang,
Tongsan Wang, Weian Wang, Wen Wang, Xi Wang, Yanxing Wang, Yuesheng
Wang,XinruWu,PanXie,BenjianXin,BinXu,WenbinXu,PingYan,Chengyu
Yang, Cuihong Yang, Ruilong Yang, Zhiyong Yang, Xianrong Yi, Xingmin Yin,
Li Yu, Zuo Yu, Fuhua Yuan, Xuheng Zang, Jinli Zeng, Wuyi Zeng, Chengsi
Zhang,FanZhang,LiqunZhang,Liancheng Zhang,Long Zhang,MingzhiZhang,
MonanZhang,PingZhang,ShuguangZhang,YanZhang,YishanZhang,Minghao
Zhao, Zhenquan Zhao, Zhijun Zhao, Chaoyu Zheng, Liqun Zhou, Zejiong Zhou,
Baohua Zhu, Jianping Zhu, and Zongming Zhuang.
The experts who joined this questionnaire survey are from institutions like
Baoshang Bank, Ministry of Finance, National Bureau of Statistics, Development
Research Center of the State Council, Hengfeng Bank, China Minsheng Bank,
People’s Daily, Ministry of Commerce, Unirule Institute of Economics,
International Department, Central Committee of CPC, China Center for
InternationalEconomicExchanges,AcademyofMathematicsandSystemsScience
of CAS, Center for Forecasting Science of CAS, National Academy of Economic
Strategy of CASS, Institute of Finance and Banking of CASS, Institute of
EconomicsofCASS,InstituteofWorldEconomicsandPoliticsofCASS,Institute
vii
viii Acknowledgements
of Quantitative and Technical Economics of CASS, China Banking Association,
Chung-Hua Institution for Economic Research, Taiwan Academia Sinica and uni-
versities like Anhui Finance and Economics University, Peking University,
BeiHang University, Beijing Normal University, Dongbei University of Finance
and Economics, Fujian Normal University, Fudan University, East China Normal
University, Jilin University, Jinan University, Lanzhou University, Nanjing
University, Nankai University, Shandong University, Shanxi Normal University,
Shanghai University of Finance and Economics, Shanghai University of
International Business and Economics, Shanghai Jiao Tong University, Capital
University of Economics and Business, Sichuan University, National Taiwan
University, Tianjin University of Finance and Economics, Tianjin University of
Commerce, Wuhan University, Xi’an Jiao Tong University, Northwestern
University, Xiamen University, National University of Singapore, Zhejiang
UniversityofFinanceandEconomics,ZhejiangUniversity,ZhejiangUniversityof
Technology,RenminUniversityofChina,ZhongnanUniversityofEconomicsand
Law, China Europe International Business School, Sun Yat-sen University, and
so on.
Thanks for the active participation and insights of all the experts mentioned
above sincerely.
Executive Summary
In2016,duetothemultiplepressuressuchasweakinternationaldemand,domestic
demand structural transformation, declining export growth, sluggish domestic
investment and slow consumption growth, China’s economic growth continued to
slow down. The real GDP grew by 6.7% in 2016, down by 0.2 percentage points
over the previous year. With the effort to cut overcapacity in manufacturing, the
industrial structural adjustment has stepped up, and industrial production growth
has been stabilized gradually. In addition, the constantly increasing share of the
tertiary industry inGDP hasnotonly relievedthepressureofeconomicslowdown
on employment, but also supported China’s economic growth.
In 2016, in order to stabilize economic growth, the banking credit expanded
rapidlytoboostthegrowthofinvestmentininfrastructureandrealestate.However,
itdidnotmakeuptheeffectofthesharpdeclineinprivateinvestmentgrowthonthe
growth of investment in fixed assets (FAI). On one hand, the high debt burden of
non-financialenterpriseshasinhibitedtheexpansionofnewinvestmentdemand.On
theotherhand,creditresourcesaretooconcentratedonrealestateandinfrastructure,
andtheirallocationbiasedtowardsthestate-ownedenterprises(SOEs).Furthermore,
as current economic systems are yet to be further reformed and various barriers to
investment still exist, private entrepreneurs’ lack of confidence in the domestic
economy, which makes the growth of private investment weak. That the private
investmentfellsharplyhasbecomeanunbearablepaintoChina'seconomicgrowth.
In the context of economic development transformation, structural adjustment,
andsustainedeconomicslowdown,China’slaborproductivitygrowthcontinuedto
decline, and began to curb the growth of residents’ income. As the decline in the
actualgrowthrateofpercapitadisposableincomeofruralresidentsiscontinuously
greaterthanthatofurbanresidents,theincomegapbetweenurbanandruralareasis
difficulttonarrow,whichinhibitsthegrowthofconsumption.Affectedbytheslow
growthofcorporateprofitsandthesharpdeclineinthegrowthofnon-taxrevenue,
the general public budgetary revenues continued to slow down and began to curb
the growth of fiscal expenditures. The fiscal spending on the people’s livelihood
areas is bound to be difficult to strengthen, which will put downward pressures on
consumption growth.
ix
x ExecutiveSummary
Over the next two years, the Chinese economy is expected to still face down-
ward pressure for following reasons: first, external economic uncertainty and the
rise of trade protection policies will continue to suppress the growth of exports;
second,macroeconomicrisksofstimulatingthegrowthofrealestateinvestmentto
maintainthegrowthoftotalFAIarebecomebiggerandbigger;third,thedeclinein
laborproductivitygrowthwillcontinuetocurbthegrowthofresidents’realincome
and consumption expansion.
In the long run, the economic slowdown is not only a manifestation of GDP
growthadjustmentafterChina’seconomyreachingtheuppermid-incomeleveland
gettingtertiarized,butalsotheresultthatthecurrentsupplystructure,formedbythe
long-term government-led extensive economic development mode, is difficult to
adapttodomesticdemandstructuraltransformationafterpercapitaincomegradually
increased.Besides,itisduetothestructuralsupplyanddemandimbalanceandthe
decline in production efficiency impacted by the global financial crisis as well.
Furthermore, there areother importantfactorsto hinder China’s rapid growth after
itsenteringintothenewnormalasfollows:incomedistributionstructuralimbalance,
slow market-oriented reform of the production factor market, lagging and incom-
plete market-oriented reform of the financial capital market, and economic growth
mode unchanged with the transformation ofeconomic development stage.
Looking ahead to 2017, the following three issues should be addressed:
Firstly, we should give full attention to impacts of the aggregate demand
structure upgrading. China’s current aggregate demand is gradually shifting from
heavily dependent on foreign demand to domestic demand. And domestic demand
structure is undergoing a major shift from playing an emphasis on the demand for
physical goods to lay equal stress on both the demand for physical goods and that
forservicesproducts.Andinthenearfuture,theemphasisisexpectedtogradually
shift to put on the demand for service products. However, compared with those
countrieswithsimilarpercapitaGDPwhoseshareofthetertiaryindustryinGDPis
about 55% on average, the share of China’s tertiary industry in GDP is still low.
More importantly, China’s current tertiary industry is still distributed in the tradi-
tional service sectors where the labor productivity is low. In the modern service
sectors, deregulation and promoting market-oriented reform seriously lag behind,
which not only reduce the production efficiency and the growth of the tertiary
industry, but also directly hindered the rapid growth in residents’ income and
consumer demand.
Secondly,withtheeffortstocutovercapacityinmanufacturingsteppingup,the
structural upgrading of manufacturing has begun to start. The high-end manufac-
turing industry, such as general equipment manufacturing, specialty equipment
manufacturing, and computer, communications and other electronic equipment
manufacturing, grew rapidly in 2016. Meanwhile, the annual shares of private
investment in manufacturing in total FAI have been over 27% since 2012. The
contribution of private investment to the transformation and upgrading of manu-
facturing cannot be ignored. If private investment growth continues to slump, it
will inevitably hinder the structural upgrading of manufacturing and inhibit
the improvement of labor productivity. Therefore, we should speed up the
