Davos - Chinese Vice-President Li Yuanchao on Thursday moved to reassure participants at the World Economic Forum in Davos that the world’s second-largest economy was still on track and would remain an important driving force for global economic growth.
Li declared that China had entered a “new normal” of steady, rather than speedy growth.
“Despite the volatility in the world economy, China still achieved a GDP increase of over $500 billion [in 2015], which is estimated to be the largest in the world,” he said.
China’s GDP grew only 6.9 percent, but Li said the “medium-high growth rate” was to be expected given the country’s drive to diversify its economic growth drivers.
Consumption, which accounted for 66.4 percent of the growth, expanded faster than investment, the main growth driver of the past, by 16.7 percentage points. The services sector was now the biggest component of GDP, rising by 2.4 percentage points to 50.5 percent.
Li said China would continue economic reforms and encourage innovation and entrepreneurship to preserve momentum. There was encouraging news in the 2.2 percent growth of the high-tech sector, 30-percent increase in online retail sales and 42-percent growth in industrial robots.
“For every single day last year, over 12 000 newly registered companies emerged across China,” said Li, an indication of invigorated entrepreneurship, along with the surge in the number of technology and business incubators aimed at young entrepreneurs.
“In the future, the Chinese government will try to make the most of the new round of the scientific, technological and industrial revolution, in other words, the opportunity brought by the Fourth Industrial Revolution,” he added.
China is the chair of the G20 group of developed and emerging countries this year, a grouping that accounts for 80 percent of the world economy. The G20 summit will be held in Hangzhou under the theme “Towards an Innovative, Invigorated, Interconnected and Inclusive World Economy”.
“The Hangzhou summit will focus its discussions on innovating growth models, improving global economic and financial governance, boosting international trade and investment, and promoting inclusive and interconnected development in an effort to provide new drivers for the development of the world economy,” said Li.
It is said that China is going through a series of historic transitions, with its economy moving from industry to services, from exports to consumption, while governance was also changing as its anti-corruption drive bears fruit.
“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, speaking at WEF.
Jiang said China could no longer depend on investment, but instead needed to rely on innovation and economic reforms to deliver the next wave of economic growth.
Gary D. Cohn, President and Chief Operating Officer of Goldman Sachs (US), said this was a difficult transition for any country, let alone during the digital era and with the lack of market liquidity in the post-crisis world.
“The shift from a capex to an opex economy means that the government has less control of economic growth,” he said.
Christine Lagarde, Managing Director of the International Monetary Fund (IMF), stressed calm in the face of recent volatility and said there needed to be acceptance that there would be a certain degree of volatility, which was entirely compatible with market-driven principles.
“The IMF is forecasting a 6.5 percent growth rate in 2016 and we see the transitions as manageable,” she added.
China was indeed going through a cyclical adjustment, said Ray Dalio, Chairman and Chief Investment Officer of Bridgewater Associates, US.
According to Dalio, this may last two to three years. “A bad year in China is a great year in almost every other country,” he said.
ANA