Expert sees high potential for economy
Nation will remain key contributor to global growth going forward
China’s economy is resilient and has great potential despite facing short-term challenges, and it is a major contributor to global economic growth, the chief economist of the Asian Infrastructure Investment Bank said.
According to Erik Berglof, China “has been and will remain an important contributor to global growth in the foreseeable future”.
“There is a huge potential in the Chinese economy,” Berglof told China Daily in an exclusive interview recently. “China graduates around 1.5 million engineers every year. There’s a lot of potential for technological development, more productivity and more economic growth.”
However, the broader economy is still facing downward pressures, including uncertainty in the private sector and weakness in the property sector, which may continue to drag down growth over the short term, he said.
“What China needs to do is exactly what is being announced,” he said. “China needs to create clear conditions and rules on how the private sector can contribute. It needs to focus on innovation, trying to bring new ideas and new ways of organizing things. All that is part of China’s contribution to the global economy.”
China’s economy is showing fresh signs of steady recovery following effective measures by the government to boost confidence, stabilize expectations and bolster demand.
Data from the National Bureau of Statistics showed that China’s official purchasing managers index for the manufacturing sector rose to 50.8 in March from 49.1 in February, climbing into expansionary territory for the first time in six months.
Berglof also said that China setting an annual growth rate target of around 5 percent for 2024 is reasonable and ambitious, and provides a solid foundation for shaping economic policies going forward.
Dismissing speculation that the Chinese economy is showing signs of peaking, Berglof said “it’s quite natural that growth pace slows down as an economy reaches the world frontier”.
He noted that China is facing demographic challenges, particularly due to a declining birthrate, saying that it has significant implications for the country’s future growth trajectory and is expected to persist for the foreseeable future.
“But one should not think of this in such negative terms, because it also means that when China expands the economy per capita, China will become richer, even if the overall growth rate may not be as high as it could have been compared to other countries with a different demographic structure,” he said.
Berglof highlighted China’s pivotal role in promoting sustainable global growth, saying the country is dedicated to achieving the goal of peaking carbon dioxide emissions before 2030 and reaching carbon neutrality before 2060. “I think that’s very good news for China, but also good news for the world as a whole.”
“China has made a major contribution by bringing down the costs of renewables so much and also now with electric vehicles. That is a contribution to the world,” he said.
Berglof said multilateral development banks such as AIIB will play a key role in bringing new technologies and innovation to emerging and developing economies, and helping them address global challenges of climate change and biodiversity law.
“We need to find ways of really investing in climate mitigation, climate adaptation and nature,” he said. “I think the multilateral development banks can work with governments and the private sector to put in place plans that can really help these countries address climate change.”
Last year, AIIB launched its 2023 Asian Infrastructure Finance report titled ‘Nature as infrastructure’, which offers a transformative approach for recognizing the value of nature and enhancing investment in the protection of nature and biodiversity. It includes nature-based solutions, direct investments into nature assets to sustain critical infrastructure-like services and directing more finance toward nature.
“There are a lot of things that nature can do, and we need to make sure that we value this property,” Berglof said. “I think the trade-off between growth and addressing climate change is overplayed. If you want to achieve growth and improve innovation, a lot of the innovation in the future will be about how to more effectively address these global challenges of climate change and biodiversity law.”