Reform implementation poses major challenges
Updated: 2014-07-28 06:59
By Andrew Moody (China Daily)
|
|||||||||||
The economist is also skeptical that any meaningful rebalancing could occur if the economy suffered an investment bust.
But a Peking University finance professor, Michael Pettis, argues in his latest book, Avoiding the Fall, that the economy would naturally rebalance if in a worst case scenario it crashed.
|
"What we need for rebalancing is a lower savings rate and lower investment rate, and higher household consumption and these need to be permanent features," Wang says.
He says any hope of rebalancing in China was delayed by the financial crisis, which led to the Chinese government responding with a 4-trillion yuan ($660 billion) stimulus, one of the largest in history, which worsened the existing imbalances. "Many government investment programs resulted in bubbles and debt problems. We need to learn lessons from the financial crisis because there was certainly over-investment in the economy."
For Wang, it also exposed a local government funding problem (many cities and towns in China remain seriously in debt), which needs to be resolved as part of the rebalancing process.
"Local governments rely too much on land sales for funding. It is not sustainable because land is limited and you cannot sell it forever. Land sales are not well monitored or transparent. Local governments need to be able to raise money in local taxes and be less reliant on central government," he says.
The government unveiled its 10-year plan for the country at the Third Plenum of the Party last October, and at the annual Central Economic Work Conference, that followed two months later, the detailed reforms for the current year were outlined.
As part of rebalancing, the government set out plans to reform the social security and health systems, which would give people more confidence to spend or consume and not save for future rainy days.
Related Stories
China's economy heading in the right direction 2014-07-28 07:18
China vows to ease financing costs for real economy 2014-07-24 09:43
Concerted efforts can help boost growth 2014-07-21 07:15
China to expect lackluster external demand in years to come 2014-07-18 11:09
China's H1 growth up 7.4%, showing economic resilience 2014-07-17 09:35
Balancing growth and transition 2014-07-17 07:07
Today's Top News
Developers placing bets on casinos overseas
Scrutiny on iPhone data access
Russian fighter jet crash kills pilot
US-Russia relations frosty
Harsher safety measures urged amid scandal
Drills to have 'little impact' on civilian air services
Revision of decree protects military airports
Experts slam Japan's bid to break order
Hot Topics
Lunar probe , China growth forecasts, Emission rules get tougher, China seen through 'colored lens', International board,
Editor's Picks
Shaolin: Fists of fame |
Keeping the peace |
Eyeballing online |
Reading into an online age |
China helps fight international war on drugs |
Crackdown on terrorist attacks |