China's economy is going through a series of historic transitions, and recent short-term market volatility will prove temporary, experts attending the World Economic Forum (WEF) Annual Meeting 2016 in Davos said on Thursday.
The Chinese government is implementing wrenching reforms trying to shift its growth driven from investment and manufacturing to services and consumption. Experts warned that the uncertainty during the process will lead to periodic market disruptions.
China witnessed a turbulent year in 2015. Growth in the world's second largest economy hit a quarter-century low of 6.9 percent, compared with 7.3 percent a year earlier.
"We see the transitions as manageable," Christine Lagarde, Managing Director of the International Monetary Fund (IMF) said, stressing calm in the face of recent volatility.
"There needs to be acceptance that there will be a certain degree of volatility; this is entirely compatible with market-driven principles," she said.
The International Monetary Fund said it expected China's economy, a major contributor to global growth, to grow by 6.3 percent in 2016.
"Indeed, China is going through a cyclical adjustment," said Ray Dalio, Chairman and Chief Investment Officer of Bridgewater Associates, USA.
"The reforms and leadership in China is fundamentally very good. What we are dealing with should be short-term challenges," said Dalio.
"This may last two to three years," he said, "the future of China is vibrant and young, and any volatility is global and linked to monetary policy."
"China has reached the point of no return - the country needs to deepen reforms to avoid the middle-income trap," said Jiang Jianqing, Chairman of the Board, Industrial and Commercial Bank of China.
"We can no longer depend on investment; we need to rely on innovation and economic reforms to deliver the next wave of economic growth," he explained.
"It is a difficult transition for any country, let alone during the digital era and with the lack of market liquidity in the post-crisis world," said Gary D. Cohn, President and Chief Operating Officer of Goldman Sachs, USA.
"The shift from a capex to an opex economy means that the government has less control of economic growth," he added.
"There is a complete decoupling of the stock market from the real economy," said Zhang Xin, Chief Executive Officer and Co-Founder of SOHO China.
She argued that, in real estate sector in China, property leasing is very strong and real asset values are rising even as listed real estate companies trade at huge discounts in the public markets.
Despite criticism, China is making strong progress: domestic consumption has grown from 49 percent of GDP five years ago to 52.5 percent now.
"China is in the midst of a major transition, and in the process a lot of assets will be revalued," said Fang Xinghai, Director-General of International Economic Department, Office of the Central Leading Group for Financial and Economic Affairs of the People's Republic of China.
He said it's a combination of Chinese and global factors that have caused recent volatility, referring to the raising of rates by the U.S. Federal Reserve, and the poor performance of emerging markets.
Fang said he has no doubt that China has the talent to adapt.
Government service and public service still carries very high esteem in China. The market is complex and sometimes China doesn't deal with this sophistication as well as it could, he explained.
"But we'll learn," he added, as the reform strategy is on track.
