Eco­nomic per­for­mance in early 2017 be­yond ex­pec­ta­tion

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“CHINA HAS SHOWN HOW AN ECON­OMY CAN ACHIEVE RAPID GROWTH BY DRAW­ING ON MAR­KET SYS­TEMS AND OPEN TRADE AND IN­VEST­MENT RE­LA­TIONS WITH PART­NER COUN­TRIES.”

The ADB has as­sisted China to sus­tain­ably re­duce poverty and bet­ter man­age vul­ner­a­bil­ity through a ro­bust and na­tion­ally in­te­grated so­cial pol­icy, to mit­i­gate the driv­ers of in­equal­ity. This in­volves a two-pronged ap­proach to re­duce lo­cal poverty and bet­ter pro­tect global pub­lic goods, and to se­cure and smooth China’s eco­nomic re­struc­tur­ing and tran­si­tion to­ward a mod­ern so­cial ser­vices sec­tor.

How do you rate China’s eco­nomic growth and busi­ness op­por­tu­ni­ties in the past five years? What is the big­gest chal­lenge it faces, and how can it over­come it?

Over the past five years, the gov­ern­ment has man­aged to main­tain suf­fi­ciently high GDP growth and en­sured eco­nomic, fi­nan­cial and so­cial sta­bil­ity. It has also made progress in im­ple­ment­ing re­forms in most of the roughly 60 ar­eas of re­form out­lined by the Party in Novem­ber 2013. With growth on a more solid foot­ing at this junc­ture, the pol­icy fo­cus has shifted more to ad­dress­ing risks to fi­nan­cial

From its open­ing-up in 1978 to 2016, China achieved a con­sis­tent an­nual growth rate of al­most 10 per­cent. This growth rate is phe­nom­e­nal, and has led to the coun­try be­com­ing one of the top economies in the world.

In ad­di­tion, the fruits of this rapid growth were broadly shared. Liv­ing stan­dards rose tremen­dously, and there have been many achieve­ments in erad­i­cat­ing poverty. Dur­ing these years of rapid eco­nomic growth, China has man­aged to lift more than 800 mil­lion out of poverty. By its own thresh­olds, poverty in ur­ban ar­eas has largely been erad­i­cated, and the

coun­try is on

The ADB signed a mem­o­ran­dum of un­der­stand­ing with the AIIB (on May 2, 2016) to strengthen co­op­er­a­tion, in­clud­ing through jointly fi­nanc­ing projects. We hope to broaden our part­ner­ship in the spirit of col­lab­o­ra­tion, rather than com­pe­ti­tion. The ADB has al­ready co-fi­nanced four projects with the AIIB. head of the China Desk of the eco­nom­ics depart­ment of the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment

What’s your big­gest ex­pec­ta­tion for the 19th CPC Na­tional Congress?

An im­por­tant is­sue is how to en­sure sta­ble and in­clu­sive growth in the com­ing years. To un­leash ad­di­tional growth en­gines, the cur­rent mo­men­tum of re­forms should con­tinue. These broadly in­clude re­forms that boost pro­duc­tiv­ity, such as im­prov­ing the uti­liza­tion of in­no­va­tion out­puts or re­duc­ing the bur­den on do­ing busi­ness, and re­forms that im­prove in­clu­sive­ness, for ex­am­ple, re­forms en­sur­ing equal ac­cess to a cer­tain qual­ity of pub­lic ser­vices na­tion­wide.

What eco­nomic in­di­ca­tors have in­creased your con­fi­dence about the Chi­nese econ­omy?

H1 per­for­mance was be­yond ex­pec­ta­tions. Af­ter such a strong first half, it would be hard to have a weak 2017, given the carry-over ef­fects. In the first half of the year, we saw strong in­dus­trial pro­duc­tion growth (which was par­tic­u­larly strong in some new and high-tech sec­tors, such as ro­bot­ics) as well as the re­cov­ery of en­ter­prise prof­its and, on the de­mand side, strong growth of in­fra­struc­ture in­vest­ment. Also, ex­ter­nal sec­tor re­cov­ery con­trib­uted to the strong growth per­for­mance.

What are the big chal­lenges ahead for China’s econ­omy?

Most peo­ple have ruled out the pos­si­bil­ity of a hard land­ing in China, but it is im­por­tant to en­sure that some sources of vul­ner­a­bil­ity do not de­rail the growth process. Cor­po­rate lever­age is still high, though it has mod­er­ated some­what judg­ing from re­cent data. An­other is­sue is lo­cal debt. Im­plicit and con­tin­gent sub-na­tional gov­ern­ment debt has con­tin­ued to ac­cu­mu­late through in­creas­ingly in­no­va­tive ways and has ne­ces­si­tated a new set of reg­u­la­tions. With­out the re­moval of im­plicit guar­an­tees, how­ever, it is dif­fi­cult to stop debt ac­cu­mu­la­tion.

What valu­able ex­pe­ri­ences China of­fer other re­gions coun­tries to boost their de­vel­op­ment? can and own

In a short pe­riod China has be­come the top in­no­va­tor in the world. It has over­taken the United States in terms of the num­ber of patents filed re­cently, and it is well ahead of other coun­tries in terms of mo­bile apps and the shared econ­omy. An im­por­tant les­son to learn from China is how to chan­nel funds for pur­poses that are deemed im­por­tant for long-term growth, such as in­no­va­tion-ori­ented re­search and how to cre­ate an en­vi­ron­ment for cer­tain in­no­va­tions to thrive. I would also add that uti­liza­tion or com­mer­cial­iza­tion of in­no­va­tion is equally im­por­tant, and that the en­vi­ron­ment for in­no­va­tion needs to be prop­erly cov­ered by reg­u­la­tions to en­sure a level play­ing field.

“H1 PER­FOR­MANCE WAS BE­YOND EX­PEC­TA­TIONS. AF­TER SUCH A STRONG FIRST HALF, IT WOULD BE HARD TO HAVE A WEAK 2017, GIVEN THE CARRY-OVER EF­FECTS.”

How would you sum­ma­rize the most im­pres­sive achieve­ments of the OECD and Chi­nese au­thor­i­ties?

Hav­ing been able to fol­low this co­op­er­a­tion for nearly 20 years, I would say agree­ing on pro­duc­ing eco­nomic sur­veys with gov­ern­ment sup­port across the board was a mile­stone in our re­la­tions. We also pro­duced a re­port on in­ter­gov­ern­men­tal fis­cal re­la­tions, which also re­ceived sup­port from across the gov­ern­ment. Then, we have re­ceived a large num­ber of peo­ple sec­onded from var­i­ous Chi­nese gov­ern­ment agen­cies, while China has joined a num­ber of our com­mit­tees.

Ben Bing­ham, China di­rec­tor for the Asian De­vel­op­ment Bank

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