Changes to keep economy robust

Updated: 2012-06-22 12:46

By Lan Lan in Rio de Janeiro (China Daily)

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Changes to keep economy robust

Making structural changes to its economy is China's top priority, despite the slowdown in growth, said Zhu Min, deputy managing director of the International Monetary Fund on Thursday.

"Changing structure is more important than economic growth for China today," Zhu said in an interview with China Daily on the sidelines of the Rio+20 Earth Summit. China needs to move from a more export and investment-driven model to a consumption-driven one, and make changes to improve people's income by cutting taxes and increasing wages and to further open the service sector, he said.

Zhu also advised China to make "very careful" preparation for an impact from Europe, although concerns over a possible Greek departure from the eurozone have reduced as Greece's new government has said they are willing to stay and honor the previous austerity commitments. "The whole European economy remains fragile, we have to say that," he said.

The European Union is also committed to keeping Greece in the euro area, as the country's exit would mean huge costs, not only for Greece, but also for Europe and the rest of the world.

That was a very positive step, said Zhu, but obviously the road will not be easy.

Greece needs to do more to implement the program and bring the whole country back on track, and Europe should further open the market, from the banking system to government bonds, to tackle the equity challenges it faces.

The economic scenario of the EU, the largest economy in the world and China's largest trading partner, has a direct impact on China's economy. China's exports to the EU dropped by 0.8 percent in the first five months, according to China's General Administration of Customs.

At a side event of the Rio+20 summit, Zhu also put forward a motion advocated by the IMF to promote sustainable development by "getting the prices right".

To make growth greener, environmental damage should be accounted for in the prices of energy and food, which would help slow pollution by raising the awareness of consumers and companies and encourage them to move away from activities that hurt the environment.

He suggested policymakers use more fiscal measures, such as environmental taxes or emissions trading systems.