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

US Investors Eye IPO for China's Alibaba

E-commerce giant handled 80 percent of China's online business last year, logging more Internet transactions than US-based Amazon.com and eBay combined More

Video Uneasy Calm Settles Over Israel, Gaza Strip

As cease-fire begins, Palestinians celebrate in streets; Israelis remain wary More

Video Chinese Doctors Use 3-D Spinal Implant

In treatment of a 12-year-old boy Chinese doctors used a 3-D printer and special software to create an exact replica of vertebra 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.
Chinese Doctors Use 3-D Spinal Implanti
X
August 27, 2014 4:53 PM
A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Uneasy Calm Settles Over Israel, Gaza Strip

Israel and the Gaza Strip have been calm since a cease-fire set in Tuesday evening, ending seven weeks of hostilities. Hamas, which controls Gaza, declared victory. Israelis were more wart. VOA’s Scott Bobb reports from Jerusalem.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. VOA News reports from Kolkata.
Video

Video Northern California Quake: No Way to Know When Next One Will Hit

A magnitude 6.0 earthquake rocked northern California’s Napa Valley on Sunday. Roads twisted and water mains burst. It was the wine country’s most severe quake in 15 years, and while hospitals treated many people, no one was killed. Arash Arabasadi has more from Washington on what the future may hold for those residents living on a fault line.
Video

Video Scientists Unlock Mystery of Bird Flocks

How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.
Video

Video Ukraine: Captured Troops Proof of Russian Role in Separatist Fight

Ukrainian officials say they have captured Russian soldiers on Ukrainian territory -- the latest accusation of Moscow's involvement in the conflict in eastern Ukraine. VOA's Gabe Joselow reports from the Ukrainian side of the battle, where soldiers are convinced of Russia's role.
Video

Video Rubber May Soon Come From Dandelions

Synthetic rubber has been around for more than a century, but quality tires for cars, trucks and aircraft still need up to 40 percent or more natural rubber content. As the source of natural rubber, the rubber tree, is prone to disease and can be affected by bad weather. So scientists are looking for replacements. And as VOA’s George Putic reports, they may have found one in a ubiquitous weed.
Video

Video Jewish Life in Argentina Reflected in Yiddish Tango

Jewish people from across Europe and Russia have been immigrating to Argentina for hundreds of years. They brought with them dance music that were eventually mixed with Argentine tango. The result is Yiddish tango -- a fusion of melodies and cultural experiences that is still evolving today. Elizabeth Lee reports from the Skirball Cultural Center in Los Angeles, where one band is bringing Yiddish tango to an American audience.

AppleAndroid