The new leadership is strongly determined to make comprehensive economic reforms

  • Time:2013-07-09

 

(近日,中国国际经济交流中心信息部部长徐洪才教授就中国经济形势和改革相关问题接受葡萄牙里斯本《Expresso》周报记者Jorge Nascimento Rodrigues的独家专访)

Jorge Nascimento Rodrigues: President Xi appears to have taken steps to encourage a change of China's economic model from an export driven and a mercantilism mentality to a system driven by growth in domestic demand. Chinese leadership has the tools to do this challenging change and undercut entrenched interests and lobbies?

Xu Hongcai: Absolutely! Led by President Xi Jinping and Primer Li Keqiang, the new leadership is strongly determined to make comprehensive economic reforms and transform China’s economic development mode. So far, we have seen some progress in this regard, which can be seen as a brilliant start. Apart from that, the nine major reforms proposed by the NDRC (National Development and Reform Commission) has been approved by the State Council, namely, income distribution, financial system, public finance, urbanization and so forth. In order to ensure that the planned reforms will be implemented properly, the central government put forward reform roadmap, timetable, and accountability system to achieve that.      

Jorge Nascimento Rodrigues: The export dynamics risks to be engulfed by downside risks? Anecdotal evidence suggested that reduced client demand abroad particularly from Europe and the US led to fewer new export orders.

Xu Hongcai: That is right! Both the US and EU have reduced their demand of Chinese goods in recent years. What is worse? We have seen the rising of trade protectionism since the breakout of the global financial crisis in 2008, which caused adverse impact on China’s exports. For example, the US and EU have not only imposed severe restrictions on exporting high-tech to China, but also make it difficult for Chinese companies to invest in their countries. Overall, there are three factors slowed down China’s exports. Firstly, the RMB appreciated a lot in the first half of 2013, which made Chinese goods less attractive in the international market. Secondly, the salary of Chinese workers has increased considerably in recent years. Finally, the rising requirement for environment protection has also pushed up the production costs of Chinese companies. As a result, there has been a significant drop in China’s exports, especially since May. To tackle those challenges, the Chinese government proposed the promotion of trade liberalization, investment facilitation as the trend of globalization is irreversible. In my viewpoint, China’s investments in the US and the EU will not only help their economies to recover, but also increase their employment.

Jorge Nascimento Rodrigues: Credit expansion has been an ongoing public topic in China for a long time. Against the background of a more structural economic slowdown in China and the high exposure to impaired assets and bubbles in some sectors of the economy, China risks a big credit crunch, or the PBOC will act in time?

Xu Hongcai: You are right. China’s credit expanded quite a lot over the past few years. The rising financing cost of SMEs has limited the growth of Chinese economy. To cope with that, the Chinese government has launched a few measures to support real economy and reform the financial system. Firstly, maintaining stable monetary policy and ensuring market liquidity. Secondly, establishing regional financial organizations to serve SMEs better. Thirdly, propelling interest rate marketization and consumption finance, and encouraging private capital to enter financial industry.

Jorge Nascimento Rodrigues: Is it possible a cascade of commercial bank defaults far beyond the shadow system turmoil?

Xu Hongcai: Indeed, China’s shadow banking developed fast recently, nonetheless, it is still manageable. The Non-Performing Loans rate of Chinese commercial banks is reducing and the China Banking Regulatory Commission is strengthening supervision on all the banks. A few years ago, it helped the Big Four state-owned banks to be listed in the stock exchanges. By doing so, the transparency of the banks has been improved a great deal, their corporate governance has been optimized and public supervision has also been strengthened.

Jorge Nascimento Rodrigues: With the changing process in the energy mix in the US (with the so-called shale revolution), China risks the score of being the next first energy net consumer country in the world. Which will be the consequences?

Xu Hongcai: In the future, China’s economic development will consume a lot of energy. The exploitation of Shale gas in the US definitely reshaped the global energy consumption. As for China, its urbanization and industrialization are unstoppable, implying that China will have huge demand for various types of energy. Right now, China is trying to reduce its over-reliance on coal and trying hard to diversify the sources of energy, such as using clean and green energy, biochemical energy and increasing the use of natural gas. To restructure its traditional energy consumption pattern, China is working hard on improving its technologies in energy, such as carbon capture. Moreover, China is expanding its cooperation with Russia, Canada, US and other countries to ensure energy security.

Jorge Nascimento Rodrigues: Where stands China in the high-tech/knowledge Economy "war"?

Xu Hongcai: China has a lot of work to do to catch up with advanced economies. it should reduce its resource and energy consumption and seek technological improvement. Specifically speaking, China should increase its investment in R&D; let enterprises, government and universities to play their respective roles; combine high-tech from developed countries with the sheer opportunities in China’s urbanization and industralization, and cooperate with the US and the EU to realize the win-win outcome. Chinese market is full of potential, the application of the European and American sophisticated technologies will not only benefit the three economies, but also the well-being of the human being as a whole.

Jorge Nascimento Rodrigues: How you forecast the role of China in the world affairs in the next years?

Xu Hongcai: Surely, China will continue to play a more important role in global affairs in the future, this is unavoidable and is a good sign. China is a proactive and responsible participant in global governance and is not afraid of taking responsibilities at all. In the short term, China will not become the leader of the world. Nevertheless, it will make more contributions to world economic development. Thus, other nations should not see China’s rising-up as a threat but an opportunity to progress.

Jorge Nascimento Rodrigues: Europe is particularly important in geopolitical terms for China? Or near-Asia, Africa and Latin America are more important?

Xu Hongcai: China has always treated every country with equal respect regardless its size and economic development. We are willing to cooperate with all the developed and developing countries. Right now, EU is China’s biggest trade partner, but China is also very keen on developing a healthy and sustainable economic and trade relations with Africa, Asia and other regions. Over the past years, there has been a great increase in trade volume between China and other emerging economies. Lately, China and the UK have signed a currency swap agreement which is worth of 200 billion RMB. In the future, China will consider doing the same with the EU and establish a RMB offshore market in Frankfurt if possible, so as to reach common prosperity and development.

 

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