Bank chairman: Reform can fix structural problems (2)

15:46, July 14, 2011      

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Guo agreed that "China's consumption is not sufficient," but it should be "fully accounted":"When we talk about the food, clothes and other things in China, consumption has increased very quickly compared to other countries."

"But when we talk about the service consumption, China's is much slower than other countries when they were in the take-off process," Guo added.

China’s manufacture industry has concentrated on the low value-added sectors for a long time, mainly on the traditional light and heavy industries, and manufacturers mainly concentrate on processing and assembly factories. "We do not have lots of export with our own intellectual property within the high-tech industry,"said Guo. For high-value-added products like iPhone and iPad, maybe China has only a share of "2 percent or 3 percent" And for one pair of shoes, “the export price is less than 3 U.S. dollars.”

"China has developed manufacturing industries, so it is called the 'world's factory,'" Guo acknowledged. "But we have very few domestically-innovated and domestically-created industries and or factories. So the total output cannot match the total input."

And the efficiency is becoming lower, according to Guo. "That's very serious as we can see that in Shanghai and Guangdong, their average return on capital actually slows down. That's a very serious problem. In very developed areas, their efficiency is becoming worse of course compared with themselves,” Guo noted.

China's environment situation is getting worse, and ecological costs have increased faster than economic growth. Guo said, "The balance of payments situation has not been improved."

China's trade surplus in the first half of this year fell 18.2 percent from a year ago to reach just short of 45 billion U.S. dollars.

"The foreign exchange reserves increased very much. In the next five years, the 12th Five-Year Plan, about another 1 trillion, 2 trillion U.S. dollars will be added in foreign exchange reserves," said Guo. "Of course that's a problem with the financial risk, currency risk, among others."

"But that's not very important. The important thing is that China is a developing country," Guo added. "It's unreasonable that we become the largest capital provider and supplier. In the past six years, China has been the No.1."

"The United States, Europe and elsewhere use money that comes from China. That is not reasonable, and especially because in the countryside, people are still living in poor conditions," said Guo.

The current account surplus of the first half of this year is still very large, "I guess it will be more than 200 billion U.S. dollars."

However, the trade surplus has actually shrunk significantly, making it just half of the surplus last year, Guo said.

"But I would like to stress that ... at the moment, it is mainly because the import price increased, the prices of major commodities increased dramatically since last year."

The amount of major commodities imported last year increased by 42 percentin terms of value volume, said Guo. "But prices for that increased more than 38 percent for big commodity price last year."

"We have to pay more than 20 million yuan more in the first half of the year as China is the largest raw material importer. So that kind of trade balance is not sustainable," Guo said.

"If China's economy slowed down, big commodity prices wouldn't be that. So I think we have to really increase the import to balance the trade in terms of commodities and other products and technology," added Guo. "Not only because the price is rising."

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By Ma Jie, People's Daily Online
 
 
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