Look on the bright side

By Chen Dongxiao (China Daily)

10:34, August 01, 2013

BEIJING, Aug.1 (Xinhuanet) -- There are voices heralding the doomsday for China's traditional development mode, the outbreak of a debt crisis, rigidification of the financial system, the vanishing of the demographic dividend, or a stagnation in reforms. These observers have one thing in common: growing pessimism about China's economic prospects.

However, while these downbeat views of the Chinese economy and its development momentum may contain some element of truth, they are too narrow to show the whole picture.

First of all, China's economic growth is depending less and less on investment and exports, as consumption and innovation emerge as the main drivers for growth, although it will take a few years to see the transition take effect. The country's economic slowdown is an inevitable trend, since no country can stay on such a fast track forever. Even so, the Chinese economy is expected to maintain an annual growth rate of around 7 percent, even with the sluggish global recovery. What best serves the long-term interests of the Chinese people is an economy that boasts a more rational structure and establishes a better social and natural environment, even if it means a slower pace of growth.

Second, the government debt issue is starting to be addressed. China's land-reliant financing has come to a dead end, and the financing vehicles of its local governments have run out of control. Some sound solutions are needed right now to avert Detroit-style bankruptcies triggered by the piling up of debts. The key here is not to alleviate the burden of old debts, because the central coffers have enough resources to repay them all. What is needed is the efficient and proper management of financial revenues and expenditures by local governments in the future to prevent new debts being incurred before the old ones have been repaid.

The debt issue is now being tackled and straightforward proposals are being submitted on bond issuance by local governments. Also, GDP is no longer counted as the main yardstick for measuring the performance of officials. The central government has also called time and again for the liquidizing of sleeping funds, and issued a decree banning local governments from constructing new office buildings for the next five years.

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Email|Print|Comments(Editor:ZhangQian、Yao Chun)

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