China says it can maintain growth
Updated
Due to domestic economic pressures, both President Obama and his Treasury Secretary Timothy Geithner were absent from the World Economic Forum in Davos, Switzerland.
Addressing the Forum, China's Premier Wen Jiabao spoke of the 'policy failures' of Western countries, and argued that China could play a bigger role in a 'new economic order'. Premier Wen said he was confident China could achieve its targeted annual economic growth of 8 percent, despite the country's GDP growth falling to a record low.
Presenter: David Wang
Speakers: Professor Ross Garnaut, economist and former Australian Ambassador to China
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(SFX - "Ladies and Gentlemen, let's welcome Premier Wen Jiabao..applause)
WANG: Speaking at the Davos meeting, Mr Wen said the world economy was in its worst state since the Great Depression of the 1930s, and admitted that the global financial crisis has had what he called 'a rather big impact' on the Chinese economy.
But he said he remained confident China could achieve its ambitious growth targets, with some 'hard work'.
That view's won support from an unlikely quarter - Professor Ross Garnaut, a leading Australian commentator on China.
GARNAUT: The most important role of China in recovery from this global recession is to keep its own growth going strongly and to maintain an open economy. And the Chinese government is strongly committed to that. China took a big hit in the September and December quarters. Both the expectation and the real economy went through a very big shakeout. And in response, the Chinese government's official community has done a number of things: A big expansion of the budget expenditure at the Central government level. And even more importantly, there is a big turnaround of monetary policy. It has been restrictive last year and the early part of this year, but all the brakes have been taken off. You've had a big expansion of bank lending, certainly evident in December last year, and continuing and expanding this year. As a consequence of all of that, I think we are going to see a relatively early turn around in the Chinese growth situation. And that's most important and positive thing that China can do for the world economy.
WANG: While Professor Garnaut says China may recover faster than other countries from the global down turn, it will still face some serious challenges in making that happen.
GARNAUT: It's very important that China succeed in rebalancing growth away from heavy reliance on growth in exports toward growth more reliance on growth in domestic demand, alongside some growth in exports. There's also a very big income distribution chanllenge. To keep strong growth going, China has to succeed in reorienting development more towards poorer regions in the middle and west of the country. To make it work, it has to be a cleanup of offical processes, it is well kown, there's a lot of corruption and poor management at local levels. So the central government's high aspirations are always put into practices. There's going to be a delicate task of China's interaction with the rest of the world through the rest of the recession.
WANG: Two of China's most important trading partners are the European Union and the United States. Last week, the incoming US Treasury Secretary, Timothy Geither accused China of manipulating its currency to boost its economy, while the EU recently decided to take dramatic anti-dumping measures against Chinese manufacturers.
Premier Wen made no reference to these incidents, but he did voice concern about foreign 'protectionism'. Professor Ross Garnaut says some of the 'hard work' ahead of China will lie in keeping relations with its major trading partners on good terms -- and says that could be achieved, in part, by keeping its own economy open.
GARNAUT: At times of recession, there's always a tendency to increase protection and individual country in the false hope that can somehow reduce unemployment. In fact, when everyone does it, it makes it worst, as was demonstrated in the great depression. So it's time when we all have to worry about that. China's very large trade surpluses, especially with the US, are a bit of a lightning rod for political concerns, and there is potential in protectionist responses in the developed countries as it goes into deep recession and I think the best way for China to combat that is first of all to maintain a open economy itself so as its recovery under its way, it's soaking in a lot of import from other country and taking sting out of the argument that its artificially riding on the backs of other countries in recovery. And it's important that its domestic demand expansion policies work, it's important for China itself, but it's very important for its international impact. If China succeeds in a return to strong growth momentum in the second half of the year, as I hope, as I think there's reasonable prospects of achievement, then that would bring down the Chinese trade and external payments surpluses , and helping the management of the new protectionist tendencies in the rest of the world.
