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Chinese economy´s biggest challenge is economic restructuring: expert (12/07/2010)

Updated: 2010/12/7 9:56:00

A well-known economist said Monday that the biggest problem in China is not inflation, but shifting its economic structure to maintain sustainable growth.

"The biggest challenge faced by China is economic restructuring in order to shift the economy to a more balanced way that will provide sustainable economic growth," Stephen Roach, former chairman of Morgan Stanley Asia, told Xinhua.

"In the post-crisis environment, the shift means to build a consumer-led economy, and that is the overriding challenge in China," said Roach, who currently serves as non-executive chairman of Morgan Stanley Asia.

Residents´ incomes in China remain at a low level. "People´s incomes are only 42 percent of the GDP, whereas in the US the rate is 86 percent. So the government should raise the income of the citizens, especially when China wants to stimulate domestic private consumption," said Roach.

"Of course, that does not mean the Chinese government should ignore the risk of higher inflation," he said.

Official data showed that China´s October Consumer Price Index (CPI), a major gauge of inflation, rose to a 25-month high at 4.4 percent.

"There is a certain amount of momentum to inflation, so it´s likely to be the a problem over the next 12 months. If the government acts quickly, it will be able to limit the problem, or else China could be facing this problem in 2012 as well," said Roach.

Roach suggested China should take broad and comprehensive approaches in dealing with inflation, and the medium-term goal of the shifted economic structure need to be maintained.

"The government has to demonstrate its resolve in dealing with inflation, and property market assets. It´s a challenge, but I think the government is up to the challenge," according to Roach.

Source: Xinhua Net

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