'Concern over pace' of China's economy unnecessary

08:20, July 21, 2011      

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Following the release of the second-quarter economic data, the market has been increasingly concerned about downward trends in China's economic indicators.

Some said that slower economic growth would lead to a series of economic and social problems, such as falling incomes and rising unemployment. Some experts believe that the tight microeconomic policies will cause a large-scale deflation after restoring the inflation to a normal level, resulting in a dramatic transition in China's economy from overly hot to overly cold.

Opportunities amid drop in economic growth

In response to the market concerns, the National Bureau of Statistics released latest economic data: China's GDP growth rate has stood between 9.5 percent and 10 percent for four consecutive quarters. National Bureau of Statistics Spokesman Sheng Laiyun said, "The growth rate is relatively high in terms of both the targets set in China's 12th Five-Year Plan and the international standard."

Although some major economic indicators behind the relatively high growth rate should be further adjusted to lower levels, Fang Zulan, a professor at the School of Economics under Renmin University of China, said that China's economy will not suffer a “hard landing” because there are greater development opportunities despite the drop in the economic growth.

"China is in the transition period of development structure and industrial model, which is different from developed Western countries. Therefore, although there are some serious problems, there are also many opportunities in the transition. The key of seizing the current opportunity is to tap the potential of human capital," Fang said.

Fang also said that management layer should be open-minded and create conditions to maximize the potential of human capital rather than simply control the capital. The largest infrastructure construction of a country is no longer the construction of airports and roads but the release and construction of human capital. Fang believes China will not miss the opportunity of transformation if it completes the infrastructure construction.

David Beim, a U.S. professor, also pointed out that the economic slowdown would lay a more solid foundation for China's development in the future.

"No country but China could maintain such a high-speed growth for 30 consecutive years, which is very remarkable. China's economic growth will slow down in the future. However, it does not mean that China will stop developing. The slight slowdown will make China look more like a normal country, not a particular country," Beim said.

Speed is absolutely not the key

Many experts believe the speed of economic growth is absolutely not the key in the current China's economy, and the truly important core of China's economy is the transformation of development mode during the 12th Five-Year Plan period and even over a longer period of time.

"Growth rate is not the only index measuring China's economic strength," Fang said. She also said that China's economic growth mainly depended on the export-oriented original equipment manufacture formed by low-quality labor. However, the profit margin has become increasingly small. Therefore, China must go on expanding domestic demand. The current transformation mainly refers to a more fundamental reform in aspects such as institution and culture.
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