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Curso Sapientia
Todd Marshall
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Embracing China's "New Normal"
Why the Economy Is Still on Track
By Hu Angang / Foreign Affairs, May/June, 2015
It is clear by now that China’s economy is set to slow in the years to come, although
economists disagree about how much and for how long. Last year, the country’s GDP
growth rate fell to 7.4 percent, the lowest in almost a quarter century, and many
expect that figure to drop further in 2015. Plenty of countries struggle to grow at even
this pace, but most don’t have to create hundreds of millions of jobs over the next
decade, as China will. So understandably, some experts are skeptical about the
country’s prospects. They argue that its production-fueled growth model is no longer
tenable and warn, as the economist Paul Krugman did in 2013, that the country is
“about to hit its Great Wall.” According to this view, the question is not whether the
Chinese economy will crash but when.
Such thinking is misguided. China is not nearing the edge of a cliff; it is entering a
new stage of development. Chinese President Xi Jinping has called this next phase of
growth the “new normal,” a term that Mohamed El-Erian, the former CEO of the
global investment firm PIMCO, famously used to describe the West’s painful
economic recovery following the 2008 financial crisis. But Xi used the phrase to
describe something different: a crucial rebalancing, one in which the country
diversifies its economy, embraces a more sustainable level of growth, and distributes
the benefits more evenly. The new normal is in its early stages now, but if Beijing
manages to sustain it, China’s citizens can count on continued growth and material
improvements in their quality of life. The rest of the world, meanwhile, can expect
China to become further integrated into the global economy. The Chinese century is
not at the beginning of the end; it is at the end of the beginning.
1. Determine if the following statements are true or false.
a. China’s pick-up in GDP plunged by a walloping 7.4% over the last quarter and is
forecasted to plummet even further this year alone. - F
b. Many pundits defend that China’s overwhelming dependence on fossil fuels for
economic growth depicts a fragile and dubitable picture for the near future. - F
c. Specialists in global economic affairs purport that China’s floundering economy
has come upon a massive barrier that is expected to extend for decades. - F
d. Forecasts indicate that China, in order to revert its current economic downswing,
must provide a substantial stimulus to its job market over the next 10 years. – F
Curso Sapientia
Todd Marshall
(“GDP growth recession” x “economic downswing”, these is not direct synonyms.
The economy can still be growing even if the GDP growth is decreasing)
It is clear by now that China’s economy is set to slow in the years to come, although
economists disagree about how much and for how long. (c) Last year, the country’s
GDP growth rate fell to 7.4 percent, the lowest in almost a quarter century, and many
expect that figure to drop further in 2015. (a) Plenty of countries struggle to grow at
even this pace, but most don’t have to create hundreds of millions of jobs over the
next decade, as China will. (d) So understandably, some experts are skeptical about
the country’s prospects. They argue that its production-fueled growth model is no
longer tenable (b) and warn, as the economist Paul Krugman did in 2013, that the
country is “about to hit its Great Wall.” According to this view, the question is not
whether the Chinese economy will crash but when.
2. Determine if the following statements are true or false.
a. According to pundits on economic issues, China is on the brink of economic
disaster goaded on by faltering development. – F
b. According to the text, China is in its initial phases of economic growth, which may
well bring about solid enhancements in the lives of Chinese citizens. – T
(questionable, because of the references to “last year” in the first paragraph” x “new
model”)
c. According to the text, an inevitable and acute economic crisis is looming in China
today.- F
d. Chinese President Xi Jinping’s view of China’s “new normal” depends heavily on
economic diversity and sustainable growth. - T
According to this view, the question is not whether the Chinese economy will crash
but when.
Such thinking is misguided. (c) China is not nearing the edge of a cliff; it is entering a
new stage of development. (a) Chinese President Xi Jinping has called this next phase
of growth the “new normal,” a term that Mohamed El-Erian, the former CEO of the
global investment firm PIMCO, famously used to describe the West’s painful
economic recovery following the 2008 financial crisis. But Xi used the phrase to
describe something different: a crucial rebalancing, one in which the country
diversifies its economy, embraces a more sustainable level of growth, and distributes
the benefits more evenly. (d) The new normal is in its early stages now, but if Beijing
manages to sustain it, China’s citizens can count on continued growth and material
improvements in their quality of life. (b) The rest of the world, meanwhile, can expect
China to become further integrated into the global economy. The Chinese century is
not at the beginning of the end; it is at the end of the beginning.