China should strive for higher than 7% economic growth: Justin Yifu Lin
Updated: 2015-05-06 13:37
BEIJING - China has the conditions to achieve an annual economic growth of more than 7 percent this year and during the 2016-2020 period, Justin Yifu Lin, former chief economist and senior vice-president of the World Bank, said.
The "around 7 percent" economic growth China set to achieve in 2015 should also be the growth target for 2016-2020, but the government should exert itself to reach growth "above 7 percent", Lin told a seminar held at the National School of Development (NSD) at Peking University on Monday.
China needs to record growth of about 6.6 percent each year until 2020 in order to fulfill the government's goal of doubling the country's gross domestic product (GDP) between 2010 and 2020, said Lin, who was the World Bank's first chief economist from a developing country and is now honorary dean of the NSD.
In order to double the average income for urban and rural residents in the same decade, China must consider a 0.5 percent annual population increase, making an annual GDP expansion of about 7.1 percent necessary, he said.
China's economic growth slowed to 7 percent year on year in the first quarter, the lowest quarterly rate since 2009, as the country shifted from an era of double digit growth to a "new normal".
If the economy continues to lose steam, there could be more job losses and financial risk in certain areas, Lin warned.
He reiterated that China has huge potential in industrial upgrades and infrastructure investment, with enough monetary and fiscal leeway to boost the economy.
"It is entirely possible to achieve an economic growth of above 7 percent and the favorable conditions will not disappear in one or two years, not in the coming five years or even longer time." Lin said.
In the latest move to bolster growth, China's central bank slashed lenders' reserve requirement ratio (RRR) by 100 basis points last month, the second across-the-board cut this year. There have also been two interest rate cuts since November, the latest was in March.
Some economists have called for more proactive monetary and fiscal moves to keep the economy on the right track, while others have concerns that growth-supporting measures could exacerbate overcapacity, put off economic restructuring and worsen air pollution.
Lin rebutted the latter views, saying more investment does not necessarily build on the already excessive capacity but can be directed towards industrial upgrades and infrastructure construction, which are important areas that will help the future economy.
He also disagreed that fast economic growth is the reason for air pollution, saying some developing countries are still troubled by smog, even with slower growth.
As a middle-income country, China has an industrial structure that mainly relies on manufacturing, which is more intensive in energy use and emissions, compared with high-income countries where the service industry is the biggest, Lin said.
"The fundamental cause for smog is the development stage we are in," Lin explained. "It's not viable to exchange economic growth for a better environment, because that would delay our transition towards a high-income economy and put even heavier pressure on the environment."
Lin also advocated a stronger government role in infrastructure investment. Such investment is crucial for economic growth but is not attractive to private companies as it takes longer to make profits, so the government should play a leading role in this area, he said.