Hu's transformation call signals confidence in recovery

08:57, February 05, 2010      

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President Hu Jintao's call for "no delay" in transforming China's economic model signals the government's confidence in the nation's recovery, Bank of America-Merrill Lynch said.

Hu urged officials at a meeting in Beijing on Wednesday to accelerate what will be a "prolonged and arduous" task, Xinhua News Agency reported. The government aims to reduce dependence on exports and investment and boost service industries, consumption and technology, Hu said.

The world financial crisis, which triggered a slump in exports, highlighted the need to change the growth model, according to Hu. Bolstering consumption in China, the world's third-biggest economy, could limit imbalances in spending and saving that may have helped to trigger the first global recession since World War II.

"Now that they're more assured about the recovery, China's leaders want to redirect the economy back to structural reform, which was on track through 2007 but disrupted by the financial crisis," said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. "China's growth may peak at around 10.1 percent this year and then slow to around 9 percent over the next few years as the government adjusts growth models."

The Organization for Economic Cooperation and Development said this week that stronger domestic demand in China because of stimulus measures is "benefiting the rest of the world".

China's economy expanded 8.7 percent in 2009, topping the government's 8 percent target, after officials scrapped lending quotas and rolled out a fiscal stimulus package to counter the crisis. That compared with an average 10.9 percent pace over the previous five years.

The government aims for a "well-coordinated combination of consumption, investment and exports", Xinhua reported. Instead of depending on increased consumption of resources, China needs to rely more on advances in science and technology, the news agency said.

Source: China Daily
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