U.S. experts optimistic about China’s economy

China’s economic growth moderated to 7 percent in the first half of this year — Some say the economy is faced with significant downward pressure, while a U.S. scholar says, there is little evidence that China’s economy is slowing.

SOUNDBITE(ENGLISH): NICHOLAS LARDY, Peterson Institute for Int’l Economics
“I think China’s medium growth potential is still in the neighborhood of 7 to 8 percent. I do not agree with those people who say from here and now china’s long-term growth would be 3 to 4 percent or even less. I say that of course conditional on further fundamental economic reforms occurring in China. And the main potential source of growth is greater productivity, particularly in the state-owned companies.”

On Aug. 11, China’s central bank decided to let the market have a greater say in forming the yuan’s central parity rate against the U.S. dollar, which led to a depreciation of more than 4 percent last month.

China’s forex reserves fell by a record 93.9 billion U.S. dollars in August, partly due to heavy spending to support the yuan exchange rate.

The sharp fall in reserves has raised questions on whether China’s reserves are sustainable if the current spending pace continues.

But Lardy says the Chinese central bank’s move is nothing to worry about.

SOUNDBITE(ENGLISH): NICHOLAS LARDY, Peterson Institute for International Economics
“If they want to use exchange rate to boost economic growth, they should have done a long time ago. Secondly, they should have depreciated by a lot more than the roughly 3 percent that has happened so far. 3 percent depreciation will not have a measurable effect on China’s exports.”

Other analysts say the moderation of China’s growth is somewhat like “growing pains”, as China makes the adjustment from an investment-led economy to a consumption-led economy.

SOUNDBITE(ENGLISH): DOUGLAS PAAL, Carnegie Endowment for Int’l Peace
“China has to make adjustment from investment-led economy much as Japan, Korea, Singapore and Taiwan had to do in their days of industrialization to one lead by service and consumption. And what we are seeing now is one of the pains of doing that which is to get the stability of the economy; China linked effectively RMB to the dollar.”

At the recent Summer Davos forum held in northeast China, Premier Li Keqiang reassured investors that China is not headed for a “hard landing”.

Some analysts say, China’s contributions to the world economy cannot be under-estimated even though the pace of growth seems to be slowing.

SOUNDBITE(ENGLISH): DAVID, NYU Center on U.S.-China Relations
“China has maintained its growth rate when Europe, Japan and the U.S. have had big economic difficulties in the period after 2008. China has been so important for the rest of the world that it has contributed depending on how you measure it to a quarter or a third of the total growth of GDP in the last five years. That’s really critical to the other countries in the world. So that may be the single most important thing that China can do.”

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