Less growth in near term means higher income in future for China: IMF expert

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Less growth in near term means higher income in future for China: IMF expert

(Xinhua) 08:28, October 30, 2013

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Less growth in China today would mean higher income in the future as restructuring efforts would nurture a more balanced and sustainable growth model, an International Monetary Fund (IMF) expert said on Tuesday.

"By favoring structural reforms over short-term stimulus, China 's leadership is illustrating their commitment to move to a more balanced and sustainable growth model," said Steven Barnett, a division chief in the Asia and Pacific Department of the IMF.

China's economy still has considerable buffers, and the risks to the outlook in the near term is extremely low, said Barnett in a new IMF blog. But the economy is becoming more vulnerable on several fronts, including surging credit, strains on local government finances, and weakening balance sheets in parts of the corporate sector, he said.

Investment accounts for nearly half of China's economic output while the share of consumption has declined in the past decade, he said. "Reversing this trend requires rebalancing growth away from investment and towards consumption," said the former IMF resident representative to China.

"Achieving more balanced and sustainable growth will hinge on implementation of a package of reforms," he said, citing further strengthening of the financial sector and opening the service sector to more competition as two priorities.

"A more market-based financial system will better channel household savings to productive uses," he said, adding that financial sector reform would also boost household income from investments directly as bank deposits would have higher returns.

Barnett said although growth in the new model would be slower, it would be of higher quality, because the new model would " improve living standards by boosting employment, income, and consumption; use less natural resources and be more environmentally friendly; and most importantly, be sustainable."

"Somewhat slower growth in the near-term is a tradeoff worth making for higher future income. This is clearly good not only for China but also the world economy," he added.

China registered a 7.7-percent growth in the first three quarters of the year, a slowdown from the two-digit growth pace seen over the past 30 years.

（Editor：LiXiang、Yao Chun）