China's economy slows, confidence holds up

TIANJIN -- China's economy is stabilizing and will hopefully sail through the crisis toward stronger growth driven by huge domestic demand, global policy makers and economists said at the 2012 Summer Davos Forum on Tuesday.

China's economy is in good shape, and has not come to an end of growth after 30 years of reforms and opening-up, Chinese Premier Wen Jiabao said at the opening ceremony of the forum.

"The giant ship of Chinese economy will surely sail ahead quickly yet steadily and reach the shore of a brighter future," he predicted.

The country is facing economic pressure but the government is confident and able to meet this year's annual economic target, he said, citing ample fiscal policy space, huge potential in domestic demand, hopeful economic restructuring and a stable political and social environment.

"We're fully confident that we have the conditions and ability to overcome the difficulties on our way ahead, maintain steady and robust economic growth and achieve development at a higher level and with better quality for a long time to come," the premier said.

He also called for confidence in the recovery of the world economy from the current downturn, as he did in the opening speeches to all five previous such forums held in China since 2007.

Lackluster global demand and slowing property investment cooled China's economic growth to 7.6 percent in the second quarter of 2012, the slowest rate since the first quarter of 2009.

Wen said Chinese leaders are "sober-minded" and recognize that there remains a long way to go in industrialization, urbanization and agricultural modernization.

That room of improvement provides China with great development potential in the mid- and long-term, said leading economists and foreign firm officials at the forum.

Justin Yifu Lin, former World Bank chief economist, forecast China can maintain an 8-percent annual growth for another 20 years.

China is now near the development level of Japan and Singapore, with similar models and strategies, while the latter two countries kept growing at an average annual rate of 9.2 percent and 8.6 percent, respectively, for 20 years, Lin said during a forum session.

He rebuffed views on inadequate consumption in China, saying consumption's share in economic output declined only because its growth was outpaced by investment, which is still much needed in the country and can help improve productivity.

To bolster the softening economy, the Chinese government has reduced interest rates twice this year, cut taxes for small businesses, encouraged private businesses to invest in sectors previously closed to them and fast-tracked construction projects.

Last week, China's top economic planner approved 55 investment projects worth 1 trillion yuan ($157.7 billion) to build highways, ports and railways across the country.

International Monetary Fund Deputy Managing Director Zhu Min praised the government's pro-growth efforts, saying China's stable growth will greatly help the world economy.

"We think China's economy is in the stage of soft landing and the overall development is stable," Zhu told reporters.

To stabilize growth is China's "top priority" and the IMF supports further policy easing to boost the economy in the country, he said.

Li Daokui, former advisor to China's central bank, forecast China's economy will bottom out in the third quarter and will pick up in the first or second quarter of next year because of recently announced government investment plans.

"It's inevitable for China's economy to see slower growth in the next three to four years, but I don't expect the slowdown to continue for a decade," Li said. "With powerful enough reforms, China's growth will be higher in the latter part of the next decade."

Reforms he viewed as necessary include improving the legal foundation for the market economy and establishing an effective welfare system.

The outlook for China's economy is positive in the mid- and long-term and the growth will probably regain momentum next year through more stimulus policies after the coming government reshuffle, according to Lu Haiqing, corporate affairs senior vice president of Tesco China.

The British retail giant plans to open 16 new stores and develop several commercial property projects in China this fiscal year (March 2012-end of February 2013), Lu told Xinhua in an interview during the forum.

China's lower growth target has slowed foreign firms' expansion in China but the country remains a top choice for investment as other markets of the world are even much weaker than China, he said.

"If you ask a CEO of any multinational company which is the most important country besides their home country, it must be China," Lu said. "Because the market is there."