China needs in­fra­struc­ture in­vest­ment: Ex-PBOC Ad­viser

Pakistan Observer - - ECONOMY WATCH -

BEI­JING—In­creas­ing in­fra­struc­ture in­vest­ment is the best way to boost eco­nomic growth in China and do­ing so doesn’t un­der­mine ef­forts to over­haul the econ­omy, ac­cord­ing to for­mer cen­tral bank ad­viser Yu Yongding. “If China does not in­crease in­fra­struc­ture in­vest­ment now, it may miss a his­tor­i­cal op­por­tu­nity,” Yu said Satur­day at an eco­nomics con­fer­ence in Bei­jing. “In or­der to re­duce ex­cess ca­pac­ity, while ad­her­ing to struc­tural re­forms, it is ab­so­lutely nec­es­sary for the Chi­nese gov­ern­ment to sup­port in­fra­struc­ture in­vest­ment to off­set the neg­a­tive ef­fect of de­clin­ing real es­tate in­vest­ment growth on eco­nomic growth.”

The time is right be­cause of the global eco­nomic down­turn, fall­ing com­mod­ity prices, the low in­ter­est rates in Western coun­tries and over­ca­pac­ity in China, said Yu, now a se­nior re­search fel­low at the Chi­nese Acad­emy of So­cial Sci­ences. Re­gional debt surged in China af­ter the 2008 global fi­nan­cial cri­sis, when the gov­ern­ment urged prov­inces that were then banned from sell- ing bonds to boost in­fra­struc­ture spend­ing with a 4 tril­lion yuan ($611 bil­lion) stim­u­lus pack­age.

The stim­u­lus was right to do be­cause with­out it “China would have ex­pe­ri­enced a hard land­ing,” Yu said. “At the time it was hard to avoid the in­crease in debt and lever­age.” China is un­likely to ex­pe­ri­ence a fi­nan­cial cri­sis as long as there’s “no largescale cap­i­tal flight,” he said. “The more likely sce­nario is a cri­sis caused by ris­ing non-per­form­ing loans, in which banks re­frain from lend­ing and firms from bor­row­ing.” Yu also said top of­fi­cials have a dim view of prospects for a re­bound, as shown by a re­cent in­ter­view with an “au­thor­i­ta­tive person.” The uniden­ti­fied of­fi­cial told the China Com­mu­nist Party’s Peo­ple’s Daily news­pa­per that eco­nomic per­for­mance will not be U-shaped or V-shaped but rather “L-shaped” for more than one or two years. “In the past the Chi­nese gov­ern­ment has rarely is­sued such a clear and not-so-op­ti­mistic judg­ment regarding eco­nomic growth,” Yu said.—Agen­cies

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