ADB economist 'optimistic' on China economy

Zhuang Juzhong, deputy chief economist of Manila-based Asian Development Bank (ADB), said he was quite optimistic about the Chinese economy, though its growth in the first half was weaker than expected, adding that he believed the Chinese economy can achieve a soft landing in the future.

In an interview with Xinhua, Zhuang said that judging by the data, the unexpected growth in the first half of 2013 was due to weaker growth of exports, domestic investment, and domestic consumption.

"While export growth has slowed significantly, growth of domestic demand has not been strong enough to fill in the gap, causing GDP growth to slow down," he said.

China's gross domestic product growth slowed to 7.5 percent in the second quarter of 2013, down from 7.7 percent during the first quarter, official data showed earlier this week. Growth in the first half of the year stood at 7.6 percent, which was above the government's full-year target of 7.5 percent.

Zhuang said he agreed with the Chinese government that the overall economy realized steady development in the period and the slower but moderate pace was the result by the voluntary efforts made by the government.

During the global financial crisis in 2008, the Chinese government came up with a 4 trillion yuan fiscal stimulus package in response to the weak domestic and overseas demand, Zhuang said, however, facing similar situation this year, "the (Chinese) government has not done the same. I believe this shows the government's intention to focus more on quality, rather than quantity of growth."

According to Zhuang, due to the weaker than expected growth, as well as the elevated funding costs in China, ADB trimmed Chinese economic growth projection for 2013 to 7.7 percent in the Asian Development Outlook 2013 Supplement released on Tuesday.

Although the figure is "lower than the double-digit growth China achieved in the recent past, it is still healthy and quite robust, especially in comparison with the rest of the world," he said.

As economy becomes more developed and per capita income level rises, economic growth is likely to gradually slow down, which is a quite normal phenomenon, said Zhuang.

In terms of China, "its income gap with advanced countries such as US, many European countries, and Japan remains very large. China's regional disparity and rural-urban income gaps are glaring. These suggest China's growth potential remains strong," he said.

Historical data show that Japan, South Korea, and Chinese Taiwan grew at 7 to 8 percent or even higher annually continuously during 15 to 20 years prior to becoming a high income country. China's current per capita income is still less than half of the threshold for a high income country, he said.

"So there is no reason why China cannot grow at that rate in the coming, say, ten years, especially from the point of view of growth potential," said Zhuang.

In his opinion, in order to achieve the great potential, there is a lot to do for the Chinese government to reform and restructure the country's economy, such as investing more on innovation and new technology and continuing to invest in physical infrastructure and human capital.

China should also deepen structural reform, including factor market reform and State-owned enterprise reform, and reduce the constraints to the development of services and promote urbanization.

Zhuang noted that China needed to address the issue of rising inequality and make growth more inclusive, and to improve its system of financial regulation and supervision and improve the management of local government finance.

"I am quite optimistic about the Chinese economy, because these are all on the policy agenda of the current government. I believe the Chinese economy can achieve a soft landing. The probability of a hard landing is very low," he said.