Expert says China on an economic turning point

Meanwhile, the professor sees problems with the inefficient state-owned companies in the extractive industry.

"There are companies which employ tens of thousands of people and make no profit. Should they close the business?" the professor asked, "For the big companies in the coal and steel sector, a closure is of course very difficult. It would not be conducive to social or political stability" , Goebel said.

"Unfortunately, there are not many examples where a change in the industry worked well," Goebel said. In Germany the coal industry is still subsidized by the state. For example, in Gelsenkirchen in the Ruhr there is an unemployment rate of 20 percent, the professor said.

According to the social scientist, lower economic growth is not a big problem. "More important is the distribution of the economic growth," Goebel said.

"Having a high economic growth and an enlargement of the income gap at the same time should not serve the interests of China. The government will purchase a smaller economic growth to strengthen the low income," Goebel said, "This is the most important measure."

The announced investment from the government in the welfare system is very important to close the income gap, Goebel said. The aim of the government is to insure the entire Chinese population until 2020...This is a major challenge, partly because of the aging society in China. In addition, China is still in the development process," the professor added.

"In the recent years the design of the systems ran very well under the circumstances. It is a great achievement that a basic care was ensured. However, it is just a primary health care and is not comparable with the systems in Europe," Goebel said.

Goebel thinks that the strengthening of the internal market is very important for China. In China currently about 50 percent of the economic output flows into capital goods. The consumption is still very low, the professor explained.

"The question is how to increase consumption, while keeping the economy running and without taking on too much debt. This is very hard to cope with," he said.

Goebel believes that an increase of the minimum wage is the best way to increase consumption. It is very important to reduce the inequality not only for social but also for economic reasons, Goebel said.

"The government has to ensure that more people have money. If a small part has a lot of money, they cannot spend everything. The money will be at the bank and will be used for loans. That are available for a similar social class," the professor explained, "People who are willing to consume have not enough money to do it."

Another central point of the Professor is the innovation capacity of Chinese companies. China invested 2.5 percent of the GDP in research, while 87 percent of these investments are made by companies. "A large part of the amount goes into product design. There are much fewer investments in basic research," Goebel said.