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Domestic Demand Robust, China Just Beginning to Take off
China's economy will continue its rapid growth and largely avoid the impact of the downturn in the US by relying on domestic demand, the governor of the central People's Bank of China said Wednesday.
Dai Xianglong forecast China's gross domestic product (GDP) would double within the next decade to 2 trillion dollars. "I could not be more sure," he told an economic forum in Hong Kong.
He said that China had already taken into account the impact of a downturn in the United States by trimming its economic growth forecast for the next year to 7 percent. Recent sharp cuts in interest rates implemented by the central bank had also helped the Chinese economy.
"I do not think the impact (of the US downturn) will be a large one," he said.
"Last year, exports to the United States amounted to 20 percent of (China's) total. But it is mainly toys and apparel and not electronic products," which are expected to take the brunt of the slowdown.
Only around 8 percent of foreign investment came from the United States, he added.
"Economic growth in China will rely on domestic demand. We are working very hard to boost domestic demand."
Dai later acknowledged to journalists at the Fortune Global Forum that there had been recent political tensions between the new administration of President George W. Bush in Washington and Beijing. But he said "economic cooperation serves the interests of both countries."
"Such cooperation will continue on the basis of equality and within international law."
Dai's bullish assessment received backing from Kenneth Courtis, managing director of Goldman Sachs Asia, who said China was "just beginning to take off."
"International investment is maximum bullish on China," he said.
"China generates savings of 400 billion dollars a year while the US has a negative savings rate.
"If China can make reforms -- and I'm fairly confident that it will -- then this will end up being one of the world's best equity markets.
"China has so completely embraced reform that it is almost destined to grow."
"We will see a country with capital markets that would be one of the central capital markets in the world."
Dai predicted the impact on China of the problems afflicting the Japanese economy "would not be that large", although he said other East Asian economies would feel the strain.
Courtis said that the Japanese economy was facing a crisis point with a Himalayan mountain of debt.
"It is really five minutes to midnight. The Japanese crisis swamps everything else."
Non-performing loans in Japan now accounted for more than 30 percent of Japan's GDP, he added.
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