The International Symposium on China's Macro Economy 2014 and China's Quarterly Macro Econometric Model (CQMM) is being jointly held by China's Xiamen University, Xinhua News Agency's proprietary news daily The Economic Reference, and Heidelberg, Germany' Springer Publishing House from the 11th to the 12th of September. At the symposium, Xiamen University released its Autumn Forecast Report of China's Quarterly Macro Econometric Model (CQMM) 2014, which includes its forecast of China's chief macroeconomic indicators for this year and the next as well as simulation results of relevant policies and policy recommendations.
This is the 17th time that Xiamen University has made its forecast for the country's economy available internationally. The research is based on China's Quarterly Macroeconometric Model (CQMM) developed in 2006 by the Macro Economy Research Center at Xiamen University. CQMM is currently the most widely used macroeconomic forecast model across China.
According to the forecast, the slowdown in the growth rate during 2014 is expected to continue. The GDP is on track to grow at a rate of 7.49 percent for the year, then decline to 7.37 percent for 2015. The CPI is expected to increase to 2.51 percent in 2014, and climb further to 2.80 percent in 2015. In addition, the Producer Price Index (PPI) will maintain a negative growth rate over these two years, however, the rate of decrease will further narrow. The forecast calls for a PPI in 2014 of -1.53 percent, before further narrowing to -0.98 percent in 2015. As for foreign trade, gross exports calculated at current prices are expected to grow 5.15 percent, down 2.97 percentage points from last year, while the growth rate for gross imports most likely will drop to 5.52 percent, down 1.71 percentage points from last year. The pickup of the recovery of the global economy during 2015 will contribute significantly to the acceleration of the restoration of the growth of China's imports and exports.
The Research Group said that in the past three years the main goals behind the regulations and controls applied to China's economy was to maintain the growth rate above 7.5 percent through the targeted implementation of microeconomic stimuli. The Research Group has drawn the conclusion that this sort of policy will lend a cyclical character to China's economy in that "when the economy slows down, microeconomic stimuli will be applied to stabilize the growth rate, as a consequence the economy rebounds to some extent, however, before long, the rate of economic growth drops again." Furthermore, the cost associated with the implementation of a microeconomic stimulus increases with its repeated use and the interval whereby the stimulus needs to be applied becomes ever shorter, while the effect on the promotion of economic growth decreases progressively.
The Research Group expressed the opinion that the above findings indicate short-term demand stimulus can only be used to smooth out the periodic fluctuations, but it will not serve to boost the economic growth rate artificially in the long run when the natural growth rate remains stable but low. They suggested that when the economy is in a downturn, it is better to get used to the "new normal" and lower expectations for an economic growth rate in line with the development of an economy characterized by periodic fluctuations.
The Research Group simulated the macroeconomic effect of lowering the expected economic growth rate by utilizing the CQMM model, and found that if the growth rate had been adjusted to around 7.2 percent for 2012 and 2013, the need to issue excess currency would be relieved to some extent, the pressure on the government to expand investment as a means for stabilizing growth would have be lessened, the government's financial balance sheet would improve, while the government's debt burden and the level of the leveraging of debt in the private sector would be lowered. In addition, the simulated calculation finds that lowering the growth rate to 7.2 percent would not trigger an increase in the rate of unemployment.
At the symposium, the Macro Economy Research Center at Xiamen University, partnering with The Economic Reference, a newspaper owned and operated by Xinhua News Agency, released the results of "China's Macroeconomic Situation and Policy Questionnaire Survey 2014." The survey contained 16 questions across four categories directly related to China's current economy and macroeconomic policy, including questions related to the pressure placed on the country's economy by the downturn, the economic situation in Europe and the U.S. during 2014, and the macroeconomic policies that China is likely to adopt in the second half of 2014, among others. Ninety-three economists from universities, research institutions, and government agencies across China took part in the survey. The survey found that 68 percent of economists believed the pressure on the economy came chiefly from the fall in the growth rate of investment in real estate and the decline in year-on-year commercial housing sales in China. Most economists believe the economy in Europe and the U.S. will pick up in 2014 and prospects are relatively positive.
About 40 economists and academic experts from China, Germany, Japan, Singapore, as well as other countries attended the press conference, and exchanged opinions on and discussed in detail the research report issued by the Research Group as well as related topics including "China's economic growth in "new normal" economy."
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