Economy still in upward phase despite weak figures

Photo taken on April 9, 2014 shows the scene of the TV debate named "Debate on Economics: Keynesian vs Supply-Side" during the Boao Forum for Asia (BFA) annual conference 2014 in Boao, South China's Hainan province, April 9, 2014. [Photo/Xinhua]

Despite recent softening economic figures, China's economy remains resilient and could maintain a growth rate of 7 to 8 percent in the next five years, Zeng Peiyan, vice-chairman of the Boao Forum for Asia, said on Wednesday.[Special coverage]

Speaking at a panel discussion attended by foreign political and business leaders, Zeng, also former vice-premier, attributed the weakening investment growth in the first two months to the central government's control on local government debt, a curb on investment in a number of industries experiencing overcapacity, lower inventories and volatility in the real estate market.

Fixed-asset investment growth in the first two months dropped to a record low of 17.9 percent, down from 19.3 percent for the whole of 2013. Industrial output in the January-February period also dropped to the lowest reading since April 2009.

He conceded that these figures may push first quarter growth under the official target of 7.5 percent, but he expected the trend to reverse in the second and third quarters due to moderate government stimulus.

"Overall, China's economy is still in its upward phase and the resilience is still there. I think it would be no problem for the economy to grow in the 7 to 8 percent range for the next five years," he said.

He is also optimistic about Asian and emerging economies' growth outlook, saying there is little possibility of an economic crisis in these economies.

"The situation now is very different from what it was in the 1997 Asian financial crisis. The region's ability to ward off financial and economic risks has improved. Many countries' foreign exchange regimes have become more flexible, and some regional mutual rescue frameworks have been established," he said.

Victor K. Fung, chairman of Fung Group, a Hong Kong-based multinational comprising major subsidiaries in trading, logistics, distribution and retailing, said China's landmark transition from a producing to a consumption power will bring about enormous opportunities for the business community.

"During the past few years, the whole change has shifted from 'made in China' to 'made and sold in China'. The most significant thing that happened in the past 30 years, in my mind, is a shift from a billion workers to a billion consumers," he said.

This great diversion will bring tremendous changes to the global supply chain, according to Fung.

"Before, I would say, the supply was quite simply one of sourcing in Asia and China and selling to the West. It is a one-way direction. Now it has become more nuanced. Yes, it is producing in Asia and China but also distributing in Asia and China," he said.

Former Japanese prime minister Yasuo Fukuda, chairman of the board of directors of the Boao forum, said that thanks to "Abenomics", Japan has finally stepped out of deflation, which would provide another bright spot for the region.

He said that along with the consumption tax increase from 5 percent to 8 percent, which boosted fiscal revenue, the Japanese government will soon roll out a 6 trillion yen ($58.6 billion) spending package.

That is expected to help lift corporate confidence and raise salaries, which in turn could raise consumption and pull Japan out of its deflationary cycle.