After 30 years of double-digit growth, China’s economy is set for slower but stable growth within two years, a member of a Chinese think tank said on Saturday.
“We are trying to change growth tracks within the next two years and enter a new stable period,” Liu Shijin, deputy head of the Development Research Center (DRC) of the State Council, told the China Development Forum in Beijing.
The Chinese economy is yet to find the “bottom” or the equilibrium point for medium-to-high growth, Liu said, calling the presumed new track “new growth normality”.
“By ‘new normality’, we mean that the lower limit of growth, which could be, for example, 7 percent, can be maintained for a relatively long period, like five years or even longer,” he added.
Despite downward pressure, China’s economy is stable, as seen in economic data for the first two months this year, Liu said, adding that there is no need for concern as the economy has the “foundations and conditions” for stable growth.
In Liu’s eyes, however, achieving “new growth normality” is no easy task.
Fiscal and financial risks from local government financing, property bubbles, overcapacity, and shadow banking must first be addressed, he said. “These risks are intertwined with each other, resulting in a vicious circle of risk transmission,” he said.
When the above risks have been dealt with, the efficiency of China’s nontradable sectors need to catch up with developed economies, especially monopolized sectors and infrastructure construction.
To meet these challenges, Liu believes the key lies in the reform plans laid out last year, and in a clear-cut punishment mechanism to address local government debt.
Some cities, provided they meet some standards, should be allowed to issue their own bonds to reconstruct local governments’ debt-paying and financing capabilities. Reform of the infrastructure sector should be greatly accelerated by eliminating monopolies and promoting competition, he said.