Robust fundamentals

Chi Fulin, president of the China Institute of Reform and Development, says China can sustain annual growth rates of 7-8 percent during the next decade if the government speeds up urbanization, boosts domestic consumption and implements a radical market-oriented reform agenda.

Even more upbeat is Justin Lin Yifu, former chief economist of World Bank. Currently a professor at Peking University, Lin says China can maintain an annual growth rate of 8 percent for another 20 years. "This is potential and China needs to strengthen reforms to turn it into a reality," Lin says.

Chin says his confidence in China's economy comes from the recent government steps to manage fiscal and monetary situations and the well-designed tools it has devised for protection against external shocks.

De Grauwe of the London School of Economics and Political Science says that global markets are generally guided by euphoria or fear. "Both of them are bad guides. The government should not be swayed by the guide swings," De Grauwe says. "China is already breaking the idea of letting the market decide everything."

De Grauwe says the International Monetary Fund used to, "require all member nations to liberalize their capital movements" but recently, it is reluctant to say so. "I think part of the reason for this is the great influence China has exerted on global institutions like the IMF," De Grauwe says.

China's "capital control" model is in total contrast to the one that is seen in the US and Europe, which believes that the financial market is always right. "China's experience has shown that the Europe and the US models are wrong and more needs to be done to strengthen capital flow regulations," says De Grauwe. "Other countries should copy this particular aspect of China's macro economic policy to avoid destabilizing the global economy."

Both Chin and De Grauwe agree that sound regulation on capital flows in China have helped cushion external shocks. China's high-speed growth during the economic crisis period has also helped spur the recovery of other global economies. The US economy is reviving, while the European economy, though still fragile, has managed to ward off a second recession.

Business leaders are also confident that China's economic transformation will help create more market opportunities for them.

Nancy McKinstry, chief executive officer of financial services firm Wolters Kluwer in Netherlands, is another expert who is bullish on China's long-term prospects. She says the government's focus on upgrading industries and moving beyond manufacturing and China's desire to move 300 million more people into cities in the coming two decades will help maintain the economic momentum.