Is China a Sustainable Engine for the Global Economy?
    2010-10-14 21:35:35      Web Editor: Han
China's economic high growth momentum will continue and it will lead the world economy to recover, said experts at a seminar held by China Alliance in Stockholm on Wednesday.
By Chen Xuefei, CRI's correspondent in Stockholm

China's economic high growth momentum will continue and it will lead the world economy to recover, said experts at a seminar held by China Alliance in Stockholm on Wednesday.

China Alliance is jointly formed by Stockholm Environment Institute and the Stockholm International Peace Research Institute, SIPRI, early this year.

With the topic of "Is China a Sustainable Engine for the Global Economy", experts from China and Sweden discussed the current macro-economic situation in China and its midterm challenges and opportunities.

Anders Ahnlid, Director General for Trade at Swedish Ministry of Foreign Affairs said that China is emerging as the leading power in the world economy.

"The financial crisis and the recession have no doubt accelerated this process, and now we are facing a situation where we have to deal with a huge economy. Already China is the largest exporter of the world, she has taken over Japan as the second largest economy and due course in 2027 she will surpass the United States and become the world's largest economy," said Ahnlid.

He said that Sweden consistently seeks to resist trade protectionism in so-called defense measures and firmly oppose restrictions in the import to the EU market. He said it is worrisome that some countries outside the EU are directly taking protectionist measures in trade.

He  said that Swedish trade with China has ended up well and even increased throughout the economic crisis, more and more Swedish companies also continue to invest in China, so far there are 500 Swedish companies established in China. Sweden will further deepen its trade cooperation with China in sustainable cities, corporate social responsibilities and technology and science.

Professor Lu Feng, Deputy Dean of National School of Development at Peking University said that China has achieved a V-shape or quick and strong economic recovery with the four trillion yuan(600 billion US dollars) stimulus package after the global financial crisis in 2008.

"China has taken a pro-active fiscal policy with large flexibility in monetary policies using diversified tools to control the bubbles," explained Professor Lu.

He said China needs a deregulated interest rate regime to adjust domestic demand.

Professor Yao Yang, Deputy Dean of National School of Development and Director of China Center for Economic Research, Peking University predicted that China will continue to develop at as high as at least 8 percent growth rate in the following 10 more years and will catch up with the US in 2022.

Currently the US 14.3 trillion dollars economy is still three times that of China's 4.93 trillion.

However, it doesn't mean China doesn't have challenges. Major challenges will be the large number of elderly people,  inefficient government investment and low share of domestic consumption.

He suggests that the Chinese government invest more in people, namely provide better education especially to those migrant workers.

On the question of substantial appreciation of the Chinese currency Renminbi, Yao said there is no way that China will agree with that.

"Due to the deep recession in the US and some of the European countries, some people hope that if China appreciates Chinese Yuan, it will solve the problem.  But I think it is an overestimation of China's role in the world economy," Yao said.

He said that similar situation happened with Japan once who appreciated its currency by 45 percent, has the world economy been saved? He said the US economic recovery then was due to the development of technology, or the new economy.

But the US government deficit since 1990s has become larger and larger. It was not because of China because China only joined the world economy in 2001.

"Our center has a project with the International Trade Commission of the US government. Our project found that even the RMB increased by 20 percent, it is not going to help the US employment. The US employment rate will increase by 0.6 percent, but the impact on China is tremendous. China's GDP growth will be slowed down by 3 percent, and employment down by 2 percent. So think of this, will the Chinese government change its policy? No way," Yao explained.

He thinks that China is going to let RMB appreciate, but not at 20 percent or even 10 percent. It will be slowly and gradual.

On the issue that the migrant workers wages are too low, the labor expert professor Lu said that the development trend in China shows that the post 80s or 90s young people from rural areas are not farmers any more.  They will come to the city to work directly after school.

That means the days to hire a rural worker with similar low salary in the past has gone forever.

"The labor market cries out for increase of rural laborers' wages. And it is the first time in China this year, the increase of rural laborers' wages in some areas surpassed those permanent staff in the cities," Lu explained.

On the issue of energy, Karl Hallding, Head of the China Cluster of Stockholm Environment Institute said that China's energy consumption is a bit worrisome even though China's development in green energy doubled the pace in the other part of the world.

Professor Yao said that there is still a huge room for China to improve its energy efficiency, thus, if China's energy efficiency improves by one third or one sixth by 2020, then China will not need to consume much more oil to achieve the living standards of South Korea or Japan.

Thus the conclusion is that if China can adapt to the changing situation and continue its reform to get rid of the constraints in its economy and pay more attention to social development, China will continue to be a sustainable engine for the global economy.


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