Editor’s Note:
The Communist Party of China concluded its 19th National Congress in Beijing last month. China Daily asked business leaders from major multinational companies for their views on economic developments here and the country’s global leadership role.
Joao Mendes De Faria is president of Vale China, a multinational mining corporation based in Brazil.
What three words would you use to describe China today?
Engine. Reform. Quality. Despite the slowdown in growth rate, China still remains the economic engine of Asia with significant opportunities for our industry.
In its latest World Economic Outlook, the IMF predicted the Chinese economy would grow 6.8 percent this year and 6.5 percent in 2018, which was 0.1 percent higher than July’s forecast.
The upward revision of the 2017 forecast reflected stronger-than-expected data in the first half of the year. That was underpinned by previous policy easing.
As for reform, China has made important supply-side structural changes aimed at developing a modernized and more sustainable economy. I believe the country is going in the right direction.
During the 19th CPC National Congress, President Xi Jinping talked about “high-quality development”. In his speech, he said: “China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development . . . We must put quality first and give priority to performance.”
This will have a profound impact as it means GDP (gross domestic product) will not be the only driver of growth. It will also be fueled by qualitative measures, such as urbanization, healthcare and the environment.
What factors will bolster China’s growth this year and in 2018?
China’s GDP expanded 6.9 percent year-on-year to 59.3 trillion yuan ($8.93 trillion) in the first three quarters. It is now expected to surpass the annual growth target of around 6.5 percent this year.
We think the Belt and Road Initiative and the Public-Private Partnership, or PPP, are the two major factors supporting the Chinese economy. A lot of infrastructure projects have been approved this year under the B&R and PPP umbrellas. This has greatly fueled economic growth.
The housing sector is another factor firing up the economy. The cooling measures from the fourth quarter of 2016 are much milder and more flexible than previous cycles.
Purchasing homes were restricted in first and second-tier cities. But they were encouraged in third and fourth-tier cities, which have offset that impact.
Credit has been another crucial economic support. China’s total social financing, a broad measure of credit and liquidity in the economy, rose to 1.82 trillion yuan in September from 1.48 trillion yuan in August.
Looking forward, we are confident the country will continue to achieve sustainable growth in the near future.
What opportunities will the Belt and Road Initiative throw up for China and the rest of the world?
The Belt and Road Initiative will benefit China, as well as other countries across the globe. In the first three quarters, trade between China and economies along the route amounted to $786 billion, an increase of 15 percent year-on-year.
Chinese businesses directly invested $9.6 billion in economies along the Belt and Road, up 29.7 percent year-on-year. Investments made by B&R economies in China stood at $4.24 billion, up 34.4 percent year-on-year.
Chinese businesses have also helped build 75 economic and trade cooperation zones in 24 markets along the Belt and Road, generating more than 209,000 jobs.
We believe this initiative could provide economies, as well as industry partners, including ourselves in the mining and the steel industries, with historical development opportunities.
I say this because of the extraordinary need for infrastructure construction throughout Asia and Africa. We believe that this development will help improve the quality of life along economies involved in the Belt and Road Initiative.
It will also generate continued demand for high quality natural resources such as iron ore.
What will China be like in five years and what is the country’s long-term future?
We continue to hold a positive outlook for China. The country has set GDP growth at around 6.5 percent this year, and between 6 percent and 6.5 percent for the 13th Five-Year Plan (2016-20) period.
Despite the slowdown in GDP numbers compared to 10 years ago, we still see solid and stable economic momentum for the country well into the future.
What is the biggest challenge China faces and how can the country overcome it?
In terms of the economy, President Xi and other prominent leaders have highlighted the systemic risks in the shadow banking sector. Liquidity management by the People’s Bank of China will be the key to prevent problems. Housing remains another challenge.
Slowing credit growth would be negative for the housing sector and therefore there is a possibility that China might stimulate the property market again to ensure balance in the economy.
In terms of the environment, China has suffered from pollution like any other industrial country. Naturally, this is a national challenge.
In this context, Chinese steel growth is moving to a more sustainable model, requiring higher productivity, lower emissions and better quality ores and blends. Vale supplies the best quality iron ore in the world with the lowest impurities.
This will increase productivity in the sector, save fuel consumption and help steel mills produce less emissions. Together, Vale and China can build a greener steel sector, contributing to the country’s objectives of achieving sustainable environmental and economic development.
