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

WHO: Anti-Ebola Efforts Should Focus on West Africa

Official says WHO is 'reasonably confident' countries bordering those hardest hit by the Ebola outbreak are not seeing the virus crossing their borders More

South Sudan Crisis Threatens Development

Economic costs and lost development opportunities in South Sudan have erased what little progress the country has made since independence in 2011 More

Ukrainian PM Warns: Russia May Try to Disrupt Sunday Poll

Arseniy Yatsenyuk orders full security mobilization for parliamentary election to prevent ‘terrorist acts’ from being carried out 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.
After Decades of Pressure, Luxembourg Drops Bank Secrecy Rulesi
X
October 21, 2014 12:20 AM
European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Young Nairobi Tech Innovator on 'Track' in Security Business

A 24-year-old technology innovator in Nairobi has invented a tracking device that monitors and secures cars. He has also come up with what he claims is the most robust audio-visual surveillance system yet. As Lenny Ruvaga reports from the Kenyan capital, his innovations are offering alternative security solutions.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video North Carolina Emerges as Key Election Battleground

U.S. congressional midterm elections will be held on November 4th and most political analysts give Republicans an excellent chance to win a majority in the U.S. Senate, which Democrats now control. So what are the issues driving voters in this congressional election year? VOA National Correspondent Jim Malone traveled to North Carolina, one of the most politically competitive states in the country, to find out.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.

All About America

AppleAndroid