The economic challenges facing emerging China

Given the lingering sovereign debt crisis in Europe, the slow US recovery and a mediocre performance in Japan, the global economy may not be suffering its worst crisis, but it could be experiencing the most complicated scenario.

Considering the expected slowing growth of emerging economies, such as China, the concerns are understandable.

There is a silver lining, however: the western regions of the world's second-largest economy are continuing to add impetus this year.

China's major central and western areas have raised their targets for economic growth this year. Most notably, the Inner Mongolia autonomous region has set an aggressive target of 15 percent year-on-year growth in 2012.

Gao Guoli, deputy director of the Research Institute of Territorial Development and Regional Economics under the National Development and Reform Commission, said the new round of western development has strongly boosted the region's strength.

"Most of the places in the western region do not overestimate their potential. They have outpaced the growth of the eastern cities over the past few years and that momentum will be maintained in the coming years," Gao said in an exclusive interview with China Daily.

Driven by the transfer of industry to inland areas and growing demand for energy, the central and western areas have become a major new driving force. Guizhou province has set a growth target of 14 percent year-on-year, while Chongqing's municipal government has posted a target of 13.5 percent.

Yunnan province has set a growth target of 12 percent year-on-year in 2012, up 2 percentage points from the previous year.

The Chinese Academy of Social Sciences, a government think tank, predicted that China's economy may grow 8.9 percent year-on-year in 2012 and the International Monetary Fund has lowered its forecast for the country's economic growth in 2012 to 8.25 percent, from the previous 9 percent estimate issued in September.

Yu Bin, a senior macroeconomic researcher at the Development Research Center of the State Council, said the country has seen an improvement in balancing the development of west and east.

The pioneering provinces of China's economic reform, such as Guangdong and Zhejiang, have simultaneously lowered their GDP forecasts for this year in their annual government work reports.

Constrained by rising costs and the challenges posed by the deteriorating environment, the eastern areas have felt the need to put greater emphasis on the shift in economic structure and industrial upgrading.

What happened in Guangdong is a microcosm of the country's trade. After rapid growth in the past 30 years, China is gradually losing its traditional competitive edge.

The uncertain global economy and sluggish external picture mean that Guangdong's export-driven economy won't work over the coming years.

A top priority of the local government is to widely promote Guangdong-made products nationally and optimize its domestic sales network, the province said at its government work report.

Guangdong, a major export base, is seeking a bigger domestic market to offset slumping overseas demand. The province's imports and exports have shown signs of waning since the second half of 2011 and continued the downward trend in January.

China's international trade recorded its biggest decline in January since the 2008 global economic crisis.

The contribution of net exports to economic growth declined to minus 5.8 percent in 2011, compared with 7.9 percent in 2010, according to the National Bureau of Statistics.

The contribution of consumption to economic growth increased by 10.1 percent to 51.6 percent year-on-year and investment as a share of GDP grew by 1.4 percent to 54.2 percent over the same period.

Slower economic growth will allow the country to adjust its economic structure and accumulate strength for future growth, said Yu.

The shift in the economic structure will provide new competitive advantages and become a new driving force in long-term sustainable economic growth.

"As the rocketing growth of China's economy slows, the contribution of consumption and services to GDP will increase gradually. The country is trying to build an economy that relies on consumption, services and innovation," Yu said.