A key official of the International Monetary Fund is urging China to continue the sometimes difficult effort to reform its huge and growing economy by making it easier to change the ownership and management of failing companies and by making bank loans and currency exchange more market-oriented.
At a discussion with Chinese financial and business leaders, David Lipton said China needs to support economic areas that are likely to grow, and be careful not to prop up sectors that have excess capacity.
Speaking Saturday in Washington at a global gathering of IMF and World Bank members and officials, he said policies that boost household spending would be good for the Chinese economy, and for the economic health of its trading partners.
Chengyu Fu, who headed two large Chinese oil companies, said he had seen some encouraging signs that excess capacity in the petroleum and coal areas was diminishing. But he said he wasn't certain the trend would continue and added that the transition to a leaner workforce could take three to five years.
Fu said China must retrain large numbers of workers who have outdated skills, while some Chinese companies also face the costs associated with huge numbers of retired employees.
News reports have said China's banks face a large number of loans that are not likely to be repaid. Huang Haizhou, managing director of China International Capital Corporation, said China has a high savings rate and is a net exporter of capital.
He said the large pool of savings would ease problems with bad loans, and that nonperforming loans were concentrated in state-owned enterprises. He said other sectors were doing better.
Also speaking Saturday in Washington, U.S. Treasury Secretary Jacob Lew said China’s economic transformation was “one of the most important global economic challenges.”
He urged China to strengthen its social safety net, cut overcapacity and open key sectors to competition. Lew said there were challenges, but China “has the tools” to build a more sustainable economy based on consumer demand in that nation.