WEF chairman confident of China's future growth

13:55, May 23, 2011      

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Klaus Schwab, founder and executive chairman of the World Economic Forum, has expressed his confidence in China's continuing economic growth while disputing bearish comments on the country.

In an exclusive interview with Xinhua, Schwab said he did not agree with U.S. economist Nouriel Roubini with his prediction that China would suffer an economic slowdown after 2013.

Roubini, also known as "Dr. Doom," wrote in an article: "Once increasing fixed investment becomes impossible - most likely after 2013 - China is poised for a sharp slowdown."

Roubini's prediction is seen as a growing concern that growth of the world's second largest economy, which seemed heavily reliant upon investment, could not be sustained.

To counter the adverse impacts of the global financial crisis, China announced a stimulus package of four trillion yuan (about 615.38 billion U.S. dollars) to be spent by the end of 2010.

The concern is "once this special boost to the economy comes to an end, the economy could take great damage," Schwab said.

However, Schwab said he was confident that China, in time, would be able to "re-channel the investments and energy, which are now put into physical infrastructure, to develop much more non-physical infrastructure such as education, research, high technologies and green economies."

By switching from a hard infrastructure to a green infrastructure, and increasing investment in green technologies, China could avoid the pitfalls that Roubini had foreseen, he said.

According to Schwab, the future challenge for China is to secure a much more balanced situation inside its national economy, which he believed is composed of two parts - one well-off and the other comparatively underdeveloped.

"It's not only balancing out the more rich provinces and the more poor provinces, but also balancing out consumption, investment, export-led industries as well as the economy, ecology and environment."

As China's traditional advantage of low labor costs seems to be diminishing, China has to "move up on the ladder of industrial production and become a country which builds its future on the basis of high technologies," Schwab said.

"The world now sees China mainly as a production place, but in my opinion, China, in the future, will become a formidable force in terms of technology and research," he said.

Referring to China's effort in regulating the real estate market, Schwab said it would take time for the effects of these policies to pay off.

China's real estate market has remained robust, defying the government's efforts to ease soaring housing prices. This has sparked speculation about a new round of tightening in the real estate sector.

In the real estate market, "measures do not happen immediately," he said, adding that China has to wait and see how these policies work out.

"If you stop the real estate market in a way that is too strong, you may have a collapse, not only in the real estate market, but also the whole economy, because the real estate market is a very important part of the Chinese economy," he said.

In April, home prices fell only in three of the 70 Chinese cities monitored by the government, compared with the same period last year. Housing prices increased at a faster pace in smaller cities, while slowing in the major cities.

During the interview, Schwab also talked about the selection of a new chief of the International Monetary Fund to replace Dominique Strauss-Kahn, who resigned after being charged with trying to rape a hotel housekeeper on May 14.

"There's one thing which is necessary -- if the new head would be chosen from one of two categories - the industrialized or emerging countries, I think the deputy should come from the other, so we need a kind of balance," he said.

"If the head is coming from, let's say, a European country, the deputy head should come from an emerging market country, and why not from China?" Schwab said.

Source: Xinhua
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