Nobel laureate says China's economic restructuring benefits other nations

08:46, March 22, 2011      

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China's economic restructuring will by and large benefit other countries, Nobel laureate in economics Michael Spence said in Beijing Monday.

Michael Spence, also a senior fellow from the Stanford University , made the remarks in an exclusive interview with Xinhuanet on the sideline of the ongoing 12th China Development Forum.

He stressed China's economic restructuring "is very beneficial for the poor developing countries, as the structure of the supply side of China's economy is going to move up the value-added ladder."

That will "leave enormous space for countries that are poor and at earlier stages of growth" to develop" without the concern that they have to compete with China ," he said.

In the meantime, Spence noted China's 12th Five-Year Plan is designed in part to create demand, especially "the right kind of demand," while accentuating the importance of the export sector, a big chunk of which lies in the U.S. and Europe.

Ambitious the plan, Spence did not hesitate to point out some pressing problems that have to be addressed -- the low consumption and low household income being merely a slender fraction of the nation's GDP as well as the runaway housing prices.

He therefore stressed China 's target of "raising household income is a good idea," though attention should be called to two points of the issue.

The first point, he said, is to "let the market raise the wages and don't try to get in the way even if it puts certain kinds of sectors out of business because they are not competitive any more."

The second, "institutional set-ups" should be changed in order to "get rid of the low-return investments."

As to the housing price hikes, Spence said the Chinese government is moving in the right direction to get them down. Consumption based on the asset bubble is not a good idea.

Asked what impacts the current international political-economic environment will have on China , Spence answered, "it is quiet mixed."

He said, "The growth of advanced countries in the world is slow and uncertain due to the recent debt crisis and continued high unemployment.

"That means China and other major emerging economies have not only to make the changes but also generate demand, however, a major downturn in the advanced economies may have adverse effect on them."

Of the catastrophic natural disaster and nuclear plant crisis in Japan , Spence thought them Japan's national tragedy that requires huge cleanup and re-construction in the future.

But "the situation is under control" and the Japanese economy will still be functional, he noted. "Japanese situation won’t give rise to big problem, either to domestic or to global economy."

Spence nevertheless did show his worry about the latest unrest in the Middle East and North Africa . "It covers so many countries, such as Egypt , Tunisia and Bahrain , so the situation in these areas will be quite unpredictable."

"f it goes a wrong way, there could be major problems," he warned at the end.

The 12th China Development Forum, sponsored by the Development Research Center of the State Council, runs from Sunday till Monday and will address a wide range of topics centered on the ongoing transformation of China's growth pattern.

Source: Xinhua
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