Analysts: China has to solve complex problems on the way to new economic model

 
March 14, 2016 - PRLog -- International observers closely monitor the annual session of China's highest legislative body - the National People's Congress (NPC), after which the plan for economic and social development of the country for the 2016−2020 will be accepted.
Analysts: China has to solve complex problems on the way to new economic model

According to the government report, China sets its growth target for 2016 in a range between 6.5% and 7%.

"In setting a projected growth rate of between 6.5% and 7%, we have taken into consideration the need to finish building a moderately prosperous society in all respects and the need to advance structural reform. It will also help guide market expectations and keep them stable," said Chinese Premier Li Keqiang.

According to him, a comprehensive analysis of all factors shows that "China will face more and
tougher problems and challenges in its development", including weak trade growth, fluctuations in the financial market, rising geopolitical risks, as well as a number of internal problems associated with structural adjustments and growing pressure on the economy of the country.

However, the Chinese Premier stressed that there are no insuperable difficulties for the country.

According to the plan for economic and social development, China will keep macro policies stable, carry out more proactive fiscal policy and restrained monetary policy. The government will intensify financial sector reform, increase the effectiveness of investment, set up new mechanisms for responding to financial risks, cut overcapacity, and carry out reform of state-owned enterprises.

It is expected that special attention will be paid to environmental issues. The NPC deputies discuss a law on environmental protection taxation, the core goal of which is to encourage enterprises to cut emissions.

Moreover, Chen Jining, China's minister of environmental protection, stressed the need to promote environmentally friendly and highly efficient use of coal, reduce raw coal consumption, and encourage the shift from coal to gas and electricity.

Commenting on the results of the main economic event in China, Francisco Cafiero, President of Latin American Centre for Economic and Political Studies of China, reminded that in 2015 China experienced 6.9% growth of its GDP, the lowest growth rate since the 1990's.

"The rate is slower than other years, but China is still growing three times more than the USA and four times more than Europe. The two-digit economic growth rate of China in the past years is primarily due to all of the foreign investment received and the growth of the exports," the expert told PenzaNews.

According to him, with the international financial crisis of 2008 China received less investment, and at the same time the income from the exports also decreased.

"In order to overcome this situation, a change of the economic policy was made to become more internal domestic market oriented," Francisco Cafiero explained.

He also added that by 2020 the Chinese government wants to reach a double digit GDP and the GDP per capita to again achieve the figures of 2010.

"In order to accomplish this, it is presumed that the growth rate must be around 6.5% annually, this is difficult to achieve due to the low growth rate of the global economy. However, China maintains the highest monetary reserve of the world, which could be injected in the economy in order to achieve the objective originally mentioned," the analyst said.

Moreover, he noted that China is also establishing areas of free trade in Shanghai, Guangdong, Tianjin and Fujian provinces, and in Beijing, testing the idea of bringing foreign investors in the area of services.

"China is the motor of the global economy, that's why it can sustain high levels of growth, and is key for the growth of other countries," Francisco Cafiero stressed.

In turn, Michael Pettis, one of the leading experts on the Chinese economy, Professor of Finance at Guanghua School of Management, Peking University, reminded that every country that has had a long period of very rapid growth driven by surging investment has always had to follow with a very difficult adjustment during which it has to cope with burgeoning debt.

"In China it is proving to be no different. China was supposed to begin rebalancing its economy in 2007, according to a promise during a speech made by then-premier Wen Jiabao, but in fact it proved too politically difficult to overcome the opposition of the 'vested interests,' and the imbalances got worse until around 2011-2012," the analyst said.

According to him, under the leadership of Xi Jinping China has slowly begun rebalancing the economy, but it still has a very long ways to go.

Source: http://penzanews.ru/en/analysis/61102-2016
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