Interview: China's economy to regain momentum despite headwinds -- Singaporean scholar

SINGAPORE, Sept. 1 (Xinhua) -- China's economy is expected to regain momentum in 2023 in face of some challenges including the interest rate rise of U.S. Federal Reserve that continues to impose pressure on the fragile global economy, a Singaporean scholar has said.

China is much less vulnerable to U.S. rate hikes thanks to its large economy with robust domestic demand, Tan Kong Yam, economics professor at Singapore's Nanyang Technological University, said in a recent interview with Xinhua.

"For China, domestic policies and domestic market are much more important driving forces in the overall economy than the U.S. rates," Tan said.

The perspective of China's economy is quite optimistic in the long run despite slowdown in the short term, Tan said.

To improve growth, China needs to properly deal with challenges such as COVID-19 impact, restore business confidence and beef up domestic demand, he added.

As a major growth locomotive for the East Asian countries, China's economic growth is very important to these countries and its economic rebound will contribute to the region's recovery, he said.

The Fed's hawkish shifts of monetary policy have led to heightened financial and economic stress in emerging economies who are struggling with economic slowdown, said Tan.

He said that developing economies saw a surge in public debt between 2019 and 2021 due to expanded government spending in the fight against the COVID-19 pandemic and global price spikes in food and fuel. The debt made up 65 percent of their gross domestic product on average.

The situation has been worsened since the tighter U.S. monetary policy drove up interest rates in the United States and consequently pushed up the cost of paying off debt for developing and low-income countries which borrow in dollars, Tan noted.

More than 30 emerging economies are now in danger of a debt crisis or are currently experiencing one.

However, it is far from over as the Fed is expected to maintain aggressive monetary policy at the expense of economic growth, Tan predicted. He quoted Fed Chairman Jerome Powell as saying that failing to restore price stability would be a "bigger mistake" than pushing the United States into a recession.

"Powell was too slow in realizing that inflation was escalating early in the year, and rising very rapidly in the U.S. He underestimated the severity of it. So, he has to make up for it by tightening monetary policy further," said the professor.

As a result, "the world would likely to experience more volatility and rising interest rates," said Tan.