News / Asia

China: Reforms, Not ‘Forceful Stimulus,’ Will Boost Economy

Workers clean windows near Apple's retail store in Beijing. China reported an unexpected contraction in exports in March, raising the danger of job losses as Beijing tries to overhaul its slowing economy, April 10, 2014.
Workers clean windows near Apple's retail store in Beijing. China reported an unexpected contraction in exports in March, raising the danger of job losses as Beijing tries to overhaul its slowing economy, April 10, 2014.
Shannon Van Sant
China’s leaders say they will not use “forceful stimulus” to boost their economy, at a time when there are indications that growth is slowing more than the government expected. The government has used massive state-backed projects in the past to boost growth. Authorities say they will stick with their economic reform plans that are aimed at building stability for the future.

Over the last year President Xi Jinping has unveiled a series of reforms to keep China’s economy from losing momentum, but those reforms may not be enough to maintain economic growth.  
 
Gross domestic product is forecast to have grown by 7.3 percent in the first quarter, and some economists believe China will fall short of the government’s official target of 7.5 percent for this year.
 
“If no reform is carried out, no good reforms are carried out, the economy may face very serious risk,” stated Economist Ran Tao, a senior fellow of the Brookings Tsinghua Center.
 
On Thursday, Chinese Premier Li Keqiang said authorities are focusing on promoting healthy development in the long term, instead of short-term measures aimed at boosting flagging growth.
 
Economist Ran said one of the biggest reform challenges is a real estate bubble, which he said is already starting to burst.  The government is attempting to implement policies that will minimize two other risks to the economy: local government debt and the country’s shadow banking system. 

David Dollar of the John L. Thornton China Center said leaders’ chief challenge will be overcoming the objections of opponents of their reform plan.  “There is a lot of opposition to specific pieces of that plan,” he said.
 
Those opponents include some of China’s powerful state-owned enterprises.  By some estimates 150,000 state owned enterprises in China control 50 percent of industrial assets and employ 20 percent of the nation’s workforce.  These government owned and operated companies are large, but they are not as efficient as their counterparts in the private sector.
 
Authorities recognize that these inefficient enterprises should be changed, but Ran said reform is not happening quickly enough. “State enterprise reform, you know breaking the state monopolies in some key sectors which still have under capacity I think the progress has been very slow,” he noted.
 
Breaking monopolies may be hard for the government, but additional stimulus measures are not.  Tax breaks for small and mid-sized companies, accelerated financing for infrastructure projects and support for public housing construction are among the measures announced last week that may help smaller companies while also boosting the overall economy.
 
China’s leaders are also trying to curb corruption, a goal that may also be served by reducing financing for large infrastructure projects, said Tsuinghua University professor Bai Chong-en. “One speculation is that corruption is easier when you engage in big projects," he explained. "It’s harder to collect money from street vendors.  It’s easier to collect money from a huge construction company.”
 
As President Xi and other top leaders push for reforms aimed at making Chinese companies more competitive, and the economy less dependent on state spending, economists say they need to move with urgency because risks continue to build in the system.

Economist Ran predicts huge problems if meaningful reforms are not carried out in two to three years.  “Hard landing, maybe large scale financial crisis and also an economic crisis,” he said.
 
For now, Chinese leaders are pressing for reforms while also warning against overly pessimistic views of the country’s economy.  In a commentary published this week, China’s Xinhua News Agency said “there is no need to panic, not least because China’s growth rates remain high compared with the recent sluggish standards of Western nations.”

You May Like

ASEAN Ministers Set to Push for South China Sea Agreements

According to documents obtained by VOA Khmer, ministers will stand up for 'freedom of navigation, unimpeded lawful maritime commerce, trade and over flight' More

Puerto Rico Defaults on $58M Debt Payment

Payment was due Saturday, default is first in country's 117 years as a United States possession More

Turkish Public Fears Jihadists More Than Kurds

Turkey facing twin threats of terrorism by Islamic State and PKK Kurdish separatists, says President Erdogan’s ruling AK Party More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Iraqi Yazidis Fear Death of Their Communityi
X
Sharon Behn
August 03, 2015 2:23 PM
A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Iraqi Yazidis Fear Death of Their Community

A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Bangkok Warned It Soon Could Be Submerged

Italy's Venice and America's New Orleans are not the only cities gradually submerging. The nearly ten million residents of the Bangkok urban area now must confront warnings the city could become uninhabitable in a few decades. VOA Correspondent Steve Herman reports from the Thai capital.
Video

Video Inclusive Gym Gets People With Disabilities in Fitness Spirit

Individuals with special needs are 58 percent more likely to be obese than the general population. According to the U.S. Centers for Disease Control, they also have an increased likelihood of anxiety, depression and social isolation. But a sports club outside Washington wants to make a difference in these people's lives. With Carol Pearson narrating, VOA's June Soh reports.
Video

Video Astronauts Train Underwater for Deep Space Missions

Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Special Olympics Show Competitors' Skill, Determination

Special Olympics competitions will wrap up Saturday in Los Angeles, and the closing ceremony for athletes with intellectual disabilities will be held Sunday night. In a week of competition, athletes have shown what they can do through skill and determination. VOA's Mike O'Sullivan reports.
Video

Video Civil Rights Leaders Struggled to Achieve Voting Rights Act

Fifty years ago, lawmakers approved, and U.S. President Lyndon Johnson signed, the Voting Rights Act of 1965. The measure outlawed racial discrimination in voting, giving millions of blacks in many parts of the southern United States federal enforcement of the right to vote. Correspondent Chris Simkins introduces us to some civil rights leaders who were on the front lines in the struggle for voting rights.
Video

Video Shooter’s Grill: Serving Food with a Touch of the Second Amendment

Shooter's Grill, a restaurant in Rifle, Colorado, attracts visitors from all over the world as well as local patrons. The reason? Waitresses openly carry loaded firearms as they serve food, and customers are welcome to carry them, too. VOA's Enming Liu and Lin Yang paid a visit to Shooter's Grill, and heard different opinions about this unique establishment.
Video

Video Despite Controversy, Business Owner Continues Sale of Confederate Flags

At Cooter’s, a store in rural Sperryville, Virginia, about 120 kilometers west of Washington, D.C., Confederate flags are flying off the shelves. The red, white and blue battle flag, with 13 white stars representing the Confederate states, was carried by southern forces during the U.S. Civil War in the 1860s. The South had seceded from the Union over several key issues of disagreement, including slavery. VOA’s Deborah Block has the story.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.

VOA Blogs