By Tian Yuan
The Central Economic Work Conference was held in Beijing from December 10 to 12, 2019. According to a statement issued after the meeting, the trend of steady long-term growth of China’s economy looks to continue for some time. The meeting called for higher-level opening-up, continued stable growth in foreign trade, stable and greater use of foreign investment and solid progress on jointly building the Belt and Road.
Recently, Yolanda Fernandez Lommen, Country Director of the Asian Development Bank (ADB) in China, sat down with China Report ASEAN to discuss issues such as the global economic situation and China’s economic outlook.
Lommen has been working on researching China’s economic growth, China’s economic reforms and the development models of Asia. Prior to joining ADB, she was Head of the Asian Studies Unit at the Royal Center for International Relations in Madrid, Senior Economist of the East Asia Department of the ADB and Head of Knowledge Hub of the People’s Republic of China Resident Mission. After seven years, Lommen returned to China as the ADB Country Director for the People’s Republic of China to oversee approximately US$14 billion in business conducted by ADB in China.
China’s Resilient Economy
As the global economy continues to slow and the world continues in-depth adjustment due to the global financial crisis, profound changes are accelerating, and sources of turbulence are increasing substantially. Lommen attributes the current global economic turmoil to uncertainties in trade negotiations among major economies which discourage investment, undermine market confidence and impede economic growth.
“The knock-on effect has been multiplied because of economic globalization,” illustrated Lommen. “The tensions of global trade profoundly influenced the securities markets, capital flows and monetary policies, furthering the downward trend of the global economy.” She noted that in the current situation, China and the United States reaching a trade deal would be significant in reducing uncertainty in the global economy and boosting investor confidence. As the downward pressure on the global economy continues mounting, news that China and the U.S. reached an agreement on a Phase One trade deal should boost confidence in global markets, stabilize market expectations and facilitate trade and investment.
“China and the U.S. reaching trade agreements as soon as possible is important for enhancing the confidence of consumers and investors,” she added. “Settlement of the dispute would be a powerful driver for the recovery of retail, investment and manufacturing.” Both countries will benefit because the statement of the Phase One trade deal itself will help strengthen economic and trade cooperation, effectively manage differences in trade and pave the way for the steady development of China-U.S. trade relations.
China is now poised at a pivotal stage of transforming its growth model, improving its economic structure and fostering new drivers of growth. The statement from the Central Economic Work Conference noted that the country faces mounting downward economic pressure amid intertwined structural, institutional and cyclical problems. China needs to deal simultaneously with the slowdown in economic growth, making difficult structural adjustments and absorbing the effects of the previous economic stimulus policies.
Lommen is confident about China’s economic development prospects. She mentioned that ADB expects China’s GDP growth in 2019 and 2020 to measure 6.1 percent and 5.8 percent respectively, according to a supplementary document added to Asian Development Outlook 2019 released in September 2019. Lommen revealed that as the U.S. and Europe have recently lowered their benchmark interest rates, causing many Asian countries including ASEAN members to follow suit on monetary easing. The overall downward trend in global interest rates has provided China with room for gradual leverage of monetary policies.
The ADB Resident Mission in China has been developing People’s Republic of China: Country Partnership Strategy (2021-2025) . Considering the economic trend and policy changes of China, the document will determine the top priorities for their work in 2020 because it is critical for ADB to do business in China. ADB’s strategy will consider China’s development goals for the 14th Five-Year Plan and map out strategic cooperation framework for the bank and Chinese customers including redesigning various relationships among governments and between governments and companies.
ADB will continue to work with China in areas such as the environment and climate change, regional and global public goods, and mobilization of private sector resources in forms of sovereign and non-sovereign operations. Lommen also stressed that priority areas for development include building institutions that ensure inclusive development such as rural development, vocational and technical education and training, elderly care, high-quality health services in multiple areas and expanded social assistance.
On December 6, 2019, 10 ADB lending projects covering China’s agriculture, transportation, urban and social development and energy were honored as best performing projects. Awardees included Air Quality Improvement in the Greater Beijing-Tianjin-Hebei Region, the Hunan Xiangjiang Inland Waterway Project, Chongqing Integrated Logistics Demonstration Project and Gansu Tianshui Urban Infrastructure Development Project.
“The awarded projects are not only achievements of the ADB Resident Mission in China, but also a demonstration of the Chinese government’s resolution and abilities on implementing reform,” commented Lommen. The biennial awards were organized to recognize projects with effective institutional arrangement, timely implementation according to schedules, smooth procurement and payment, strict compliance with loan terms and effective output. She insisted that ADB would continue to perform its function to strengthen strategic partnerships with various customers from central and local government departments, support preparations for projects applying for loans and technical assistance, manage the development of knowledge products and improve its foreign operations related to China.
It was reported that in 2019, ADB planned to provide China with US$1.8 billion in sovereign loans and US$350 million in the private sector. The money will mainly be used in areas such as environmental protection, waste incineration for power generation, healthcare, senior care and agribusiness. ADB will continue to provide longterm support to the Chinese government for its three major cross-sector flagship projects, the Yangtze River Economic Belt Plan, the Beijing-Tianjin-Hebei Air Pollution Control Project, and the Rural Vitalization Plan. ADB will grant lending in the form of project loans, policy-based lending, results-based lending, and financial intermediary loans to continue to support China’s priority areas for development.