Today US Secretary of the State John Kerry starts an official visit to China. He arrives in Beijing at the invitation of the Foreign Minister of China, Wang Yi. The sides have a lot to discuss, because the head of the National People's Congress Foreign Affairs Committee, Fu Ying, thinks that within the triangle of Russia, China and the USA, the most stable and successful level of relations is only between Moscow and Beijing.
Meanwhile, the growth of China’s economy in 2015 was the weakest in the last 25 years, Beijing admits. This year the pace of economic growth may slow down to 6.6%-6.8%.
Alexander Apokin, the head of the research group of global economics at the Center for Macroeconomic Analysis and Short-Term Forecasting, thinks that the problems of development facing China today are of a long-term nature. “The risks which should have been implemented in the course of China's transition in the framework of a balanced growth policy to investment redistribution, the elimination of overcapacity, the restructuring of the labor market, are emerging right now. We already see unemployed people in the regions of China, soon perhaps such terminology, familiar in Russia, as the 'old industrial areas' will become relevant, that is, those areas where manufacturers were based, which lost competitiveness,” the expert predicts.
He believes that the devaluation of the yuan is already a reality: “We are talking only about the speed with which this devaluation will be implemented. The situation in which the Chinese Central Bank loses reserves is obviously unstable, and moreover, right now it does not meet the strategic interests of China. There are historically low growth rates of macroeconomic indicators. This is a threat of any sudden crisis changes, but it won’t lead to new crisis shocks.”
According to Bloomberg, the outflow of capital from China reached $1 trillion in 2015 in the context of the yuan's devaluation, a slow-down of economic growth, and a drop in the stock market. The index surpassed the index of 2014 sevenfold.
However, Apokin says that “China has no convertibility on its capital account, so you should not expect any wave-like sharp outflow of capital, which we used to observe in other emerging markets. Most likely we should expect a so-called 'creeping' capital outflow. It was there in previous years. A couple of years ago big frauds were detected, in which capital outflow was disguised as foreign trade contracts. And in general, if we now look at the statistics of the balance of payments of China, the proportion of omissions and errors there is too great and, basically, the structure raises questions. But we do not see it reflected in the prospects for growth to a greater degree than restructuring and transition to more equitable growth in the region are reflected.”
