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China plays down GDP size

by Frank Ching

More than a week after new World Bank figures indicated that China would overtake the United States this year and become the No. 1 economy comes the news that, for the first time, the world’s three biggest public companies and five of the top 10 in the Forbes Global 2000 List are Chinese.

American companies accounted for the remaining five on the top 10 list. The biggest U.S. companies were JPMorgan Chase and Berkshire Hathaway, in fourth and fifth place respectively, trailing Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China.

There are no European companies among the top 10. Royal Dutch Shell and HSBC Holdings, among the top 10 last year, have been edged out.

Xinhua, the official Chinese press agency, reported the news without comment under the headline “China has world’s 3 largest companies: Forbes.”

This was unlike the treatment given to the report the previous week that China would become the world’s largest economy this year. Then, the news was played down, if reported at all.

In fact, the official People’s Daily newspaper made clear the disdain with which the Chinese government held predictions using purchasing power parity by declaring, “Chinese want a better life, not an artificial ranking as world’s no. 1 economy.”

It cited “another report from the World Bank” that “indicated that the GDP of the U.S. was about $16.8 trillion in 2013, ranking first, while China’s GDP was only $9.18 trillion, ranking second.” It then put things in better perspective by saying: “China’s per capita GDP ranks only 99th in the world.”

Clearly China not was comfortable about its elevation to the world’s No. 1 economy by the end of this year. Being in second place is more comfortable and can be used by the government to urge the Chinese people to work harder.

The People’s Daily recalled that “catching up with the United States” was once stated as the goal of the Chinese people. But it added pointedly, “this meant not only the pursuit of economic strength but also a strong demand for self-esteem and self-confidence.”

It pointed out that during the Qing Dynasty (1644-1911), “China’s GDP led the world,” but at the time China’s was “a backward, isolated, ignorant and humiliated society.”

It concluded that “for most Chinese, a better quality of life with safe food, water and air is more important than being the world’s No 1 economy.” Thus pursuit of GDP, which drove Chinese policy for most of the last 35 years, has now taken a back seat to quality-of-life issues.

This approach is reflected in the language used by the country’s top leaders nowadays. President Xi Jinping, in a speech in Zhengzhou on May 10, said the country should adapt to new norms for its economic growth and a slowing down of its economy.

“We must boost our confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded,” he said. The same day, Zhou Xiaochun, the central bank governor, asserted at a conference in Beijing that there would be no massive stimulus of the economy and macroeconomic policies should be stable.

These remarks coincided with reports that growth in the first quarter had dropped to 7.4 percent, substantially below the 7.7 percent of 2012 and 2013 and considerably less than the double-digit growth of previous years.

In a talk at the Asia Society in Hong Kong on May 9, the former chairman of the China Banking Regulatory Commission, Liu Mingkang, called on people not to worry about the size of the economy and which country China wanted to catch up with.

“China’s economy is slowing down quite a bit,” he said, but sustainability is more important than speed. Growth of about 7 percent is still very good and as long as it stays at or above 6.8 percent, 9 million new jobs will be created each year, he said. What’s more important is reform and the way that it is managed — not the size of the economy.

One significant reform announced by the State Council is the building of a new share listing system centered on greater disclosure of information.

The guideline acknowledges that China’s stock markets are still not mature and set the goal of a “multi-tier capital market” by 2020.

The de-emphasis on GDP growth and stress on environmental protection, reform, and greater disclosure of information to investors are all steps in the right direction. Progress depends on future execution of these policies.

Frank Ching is a journalist based in Hong Kong (Frank.ching @gmail.com). Twitter: @FrankChing1