Economic shift should go 'full speed ahead'
Updated: 2012-04-19 21:19
By Oswald Chen in Hong Kong (Xinhua)
China needs to accelerate the transformation of its growth model to cope with external challenges and internal problems, said Liu Mingkang, former chairman of the China Banking Regulatory Commission.
Speaking at the China Political & Economic Forum: Global Challenges & Opportunities, organized by the Friends of Hong Kong Association and China Daily Asia Pacific, Liu said that the nation's economy faces many challenges, though it is maintaining overall stable economic growth.
The economy grew 8.1 percent in the first quarter, 0.8 percentage point slower than in the fourth quarter, Liu noted.
Also in the first quarter, inflation-adjusted retail sales grew 10.9 percent, which was 0.7 percentage point slower than the full-year expansion rate for 2011, Liu added.
"The Chinese economy is facing the pressures of an evident export demand contraction and difficulty in enhancing domestic demand," Liu cautioned.
Exports grew 7.6 percent in the first quarter, 5.8 percentage points lower than in December 2011.
Breaking down exports by category, Liu noted shipments of textiles, clothing, shoes, packaging bags and ceramics had all contracted in early 2012.
Export demand is shrinking, but it's not easy for China to shift its economy to a consumption-driven model. The country is facing difficulties in expanding domestic demand, and this is particularly evident in the southeastern provinces.
According to Liu, the growth of consumption expenditures in Guangdong province in January and February was 10.4 percent year-on-year. In the same two months of 2011, consumption spending grew 16.1 percent.
"Despite the challenges that China is facing, the country can employ its fiscal, taxation and monetary policies in an integrated manner to hasten the transformation of its growth model," Liu said.
First, the government can undertake fiscal and monetary reforms to accelerate the reform of monopolies.
Second, there is a huge demand for mergers and acquisitions in various industries in China. The government could offer taxation, fiscal and monetary policies to support M&As.
China must also do more to protect intellectual property rights and nurture innovation, Liu added.
"The Chinese government and enterprises, through cooperation, can proactively create a good international environment that can help slash the costs and mitigate the risks for enterprises undergoing a transformation," Liu concluded.