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Economists: China´s macroeconomic control policies prove fruitful (05/24/2010)

Updated: 2010/5/24 10:07:00

The macroeconomic control policies adopted by the Chinese government since mid-2008 have been proven successful, two economists said Saturday.

Since late 2008, the Chinese government has taken a series of macroeconomic control policies to deal with the global financial crisis. The government carried on massive financial investment, some of which focused on real estate.

"In spite of some problems, the Chinese government has been making great progress in regulating and controlling the Chinese economy during the global financial crisis," Min Tang, a Chinese economist, said in an exclusive interview with Xinhua.

"Everything has two sides, good and bad. This macroeconomic control policy is an action taken to fight against a crisis," he said.

Tang believed that whether or not the policies are successful should be judged from the macro perspective instead of a micro perspective.

"China was able to resume its rapid growth first when the global economy was still going downhill," Tang said, "China also successfully kept the confidence of its people and enterprises, which is more important than anything else. Therefore, the government´s macro control is very successful."

In addition, Tang said that the increased investment in infrastructure has strategic significance for the Chinese economy.

"The government invested over 60 percent in infrastructure. This is much needed for the long term development of the Chinese economy, especially for cities and rural areas," he said, "It will bring great potential for the future development of the economy."

Tang also noted some problems caused by the control policies.

"First of all, the real estate bubble was blown up during this process. This is very dangerous," he said, "The soaring real estate price makes it impossible for average people to buy any real estates."

Another problem, according to Tang, is the huge local government debt, which has amounted to about 7,000 billion Yuan (47,793 billion U.S. dollars).

"This is an enormous number which might cause potential economic troubles in the future," he said, "This number is twice as much as the annual income of the local governments."

Xiaolei Zuo, chief economist at China Galaxy Securities Company Limited, agreed with Tang.

"During the sudden storm of global economy, as a developing country, if China can not stabilize its economy quickly, it will be very dangerous and take much longer to recover the confidence level," she said.

Zuo said the 4,000 billion Yuan (27,310 billion dollars) government investment played a critical role in not only stabilizing the Chinese economy, but also contributing to global economy.

"The Chinese government´s control policy should receive very positive evaluation," she said.

Meanwhile, she said there are problems that the country should be concerned with during the recent round of adjustment.

"The Chinese government fully recognized the problems and risks and has taken actions accordingly," she said.

Regarding inflation, Zuo said, "There are very many complicated reasons for inflation."

"It happens regularly in an economy," she said, "Many people misunderstood it and worried too much."

She said that China, a country with a growth rate of about 10 percent, is capable of handling an inflation rate of about 5 percent.

"If there are no unexpected events this year, the Chinese government should be able to control its inflation rate between 3 and 5 percent," she said, "On the other hand, inflation can be taken care of through subsidizing people with low income and applying price limit to certain products."

Source: Xinhua

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