Justin Yifu Lin, former chief economist and senior vice-president of the World Bank, said growth of 7 percent is both achievable and necessary during a recent meeting of academics at Peking University.
Lin highlighted various aspects of the economy that presented both opportunities and challenges that can be turned to advantages for Chinese growth amid an uncertain global outlook.
Even with excess capacity, in which demand for products is less than supply, industry has opportunities, especially with so much room to upgrade manufacturing and production and turn low-end products into high-end ones.
Premier Li Keqiang noted in his annual government report in March that upgrading from low-end to the high-end will provide more opportunities for investors.
In recent years, many infrastructure projects have been completed but city infrastructure deserves greater focus.
It is impossible and unacceptable to shut down all plants and factories and turn the clocks back to 1979. To deal with environmental problems, it is necessary to introduce environmentally friendly equipments and new modes of manufacturing.
In the process of urbanization, more farmers will move into towns and cities, which will provide perfect opportunities for investors, creating high economic and social returns.
Lin then compared China with other developing countries and noted three key differences:
1. Lower-level government debt
With government debt only accounting for less than 50 percent of GDP, the investment environment in China is relatively better than most developing countries where government debt is more than 100 percent of GDP, providing the largest developing country with enough room to carry out fiscal policies.
2. Large household savings
China has no equal in terms of domestic household savings.
3. Large foreign exchange reserves
China has $4 trillion in foreign exchange reserves which will be helpful for overseas investment and importing machines and equipment.
Considering these factors, China enjoys advantages in dealing with global economic turbulence or downturns. Despite the global financial situation, it is still possible to maintain economic growth at 7 percent because those factors will bring more opportunities to investors, which will finally create more employment and stimulate growth.
According to Lin, one of the world’s leading economists, it is imperative to keep the growth rate at 7 percent.
If China’s economic growth rate lowered to say 6 percent, companies will be stuck in a quagmire and may face pressure to lay off employees.
2. Financial stability
Low growth will influence companies’ expectations on the economy, which will, in turn, lower the growth rate, making a vicious cycle. Under such circumstances, companies’ operating conditions will get worse and bad debts will increase, which will cause a continuing impact on financial stability.
3. Economic targets
According to the target set by the 18th CPC National Congress, it is required that gross domestic product and the income of urban and rural residents should be doubled by 2020. In order to reach the first target, it is necessary to keep the national economic growth rate at 6.6 percent from 2015 to 2020, but for the second one, 7.1 percent is required.