Look a little more closely at China's economy and you will see there is no reason for gloom

On recent trips to the West, I've discovered that the further from China people are, the worse the economy looks.

After Chinese President Xi Jinping's recent trip to the United States, he has been in Britain over the past few days, and having him in the country may have helped lessen the gloom with which some in the West view the Chinese economy.

The recent stock-market correction, currency depreciation, and data disappointments have exacerbated concerns about China's slowdown. We are all affected by this, and investors in the West seem shaken; they will look to Xi for explanations and, more importantly, reassurance.

Western commentators often question Beijing's willingness and ability to respond effectively to China's challenges. They struggle to see a country changing to a more sustainable economic path, ready to embrace reform and engage more with the world.

Perhaps closer scrutiny would help.

There is no denying there are pressures; real economic activity is slowing in China, and there are risks from the property-market correction, excess capacity in manufacturing and high debt levels. But the pessimism is overdone.

Recent turbulence should not be mistaken for a drastic worsening of fundamentals. If anything, such setbacks have prompted policymakers to give greater priority to reform, and to ease policies more decisively.

We have seen down-payment requirements being reduced for first-time home buyers. The sales tax on small cars has been halved. Targeted fiscal spending was up 15 percent in the first eight months of the year. This is in addition to a more accommodative monetary policy, including five interest rate cuts and three reserve requirement ratio cuts since last November.

The impact of such easing is yet to be seen. These policies feed through to the real economy with a lag of five to nine months, according to People's Bank of China researchers.

The recent renminbi depreciation illustrates another key challenge China faces: the scope for its multiple policy objectives to be misread by the market.

The renminbi fixing reform on Aug 11 was intended to meet the International Monetary Fund's call for a more market-driven foreign exchange regime, increasing the renminbi's eligibility for inclusion in its Special Drawing Rights basket of currencies.

The depreciation was needed to close the onshore spot-fix gap, but many interpreted it as a competitive depreciation to boost growth. What was intended as a positive reform turned into world-wide foreign exchange turbulence.

Could the intention have been better communicated? Certainly. But for an economy of China's scale to simultaneously transform its domestic market and open up to the rest of the world, there are bound to be bumps along the way. The key is to keep taking the right steps to deliver an open and sustainable economy. One senior official told me that the government will continue to keep the reform accelerator to the floor unless the employment data show signs of stress.

Such steps will not be easy when cyclical headwinds are strong and market confidence is fragile. So it is encouraging to see China accelerating market liberalization amid the recent turbulence, continuing to meet the prerequisites for SDR inclusion. The range of reforms encourages more international use of the renminbi, such as allowing foreign public institutions to access the onshore interbank foreign exchange market, and relaxing the eligibility for renminbi cross-border pooling. In the past few days ,the China International Payment Systems has been launched, and multinationals such as Ikea were among the first to effect payments internationally via the new renminbi platform.

With more reforms on the way, the world should adjust the way it sees China. It is an economy that is evolving and maturing.

Admittedly, Chinese manufacturers still face the triple whammy of over-capacity, weak end-demand, and rising wages. But Beijing is motivating manufacturers to move up the value chain, boost productivity and manage costs; there will undoubtedly be more casualties.

In fact, China's challenged manufacturers are becoming a less significant part of the story as the economy shifts toward services and innovation, with the former now accounting for roughly half of China's GDP.

There is a big slowdown in retail sales in China. But the consumer demographics that attracted Western countries to invest in China more than a decade ago remain compelling.

The government is also getting to grips with the large but manageable state debts by swapping local government loans for bonds and imposing a ceiling on local governments' debt levels.

And for every Trans-Pacific Partnership Agreement that is said to hurt China's long-term competitiveness, there will be a corresponding Belt and Road Initiative that promises to boost trade and investment growth.

Perceptions affect confidence, and I believe the perceptions of China in the West are skewed. I see a China that is fast opening up, a government that is determined to reshape its economy and drive through much-needed and long-ranging reforms. The process will not be painless; but the West should be a constructive participant. After all, a China whose economy is more sustainable, predictable and market-oriented is good for the world.

The author is Standard Chartered regional chief executive officer for Greater China & North Asia. The views do not necessarily reflect those of China Daily.

( China Daily European Weekly 10/23/2015 page11)