Growth targets achievable despite restructuring

Chinese tourists take a selfie with canned drinks and fried chicken at a park in Incheon, South Korea, on March 28. New government policies are moving the country toward a more consumer-driven economy. [Photo/Agencies]

Yi Gang, deputy governor of the People's Bank of China, said on Thursday that China can achieve its growth target despite its efforts to restructure its economy.

He made the remarks when meeting in Washington with Ben Bernanke, former chairman of the Federal Reserve.

"I'm pretty confident that we'll have 6.5 to 6.7 percent annual GDP growth this year," Yi said.

Bernanke said his recommendation to China is to focus more on targeted fiscal policy.

"Use fiscal policy as a way of achieving the level of demand, which doesn't have quite the negative effects on the currency that monetary policy can have," Bernanke said.

"I would say that we have a solid foundation to continue to fight this weak demand, and for the global economy, we can, through macroeconomic policy and through reform, restore trade and restore growth," Yi said.

China's economy has, over the past couple years, undergone a transformation from being characterized by heavy industry to one with a growing service sector and consumption, according to the panel.

Yi provided an early assessment of China's transition.

"Consumption is relatively stable, but last year, consumption contributed about two-thirds of GDP growth. So all these indications point to China already being in a transition from a heavy industry and export-oriented economy to a consumer-driven economy," Yi said.

This year, China is going to increase the deficit ratio to 3 percent of GDP, which is more than 2 trillion yuan ($309 billion), according to Yi.

"The proactive fiscal policy in China is very important," Yi said.

Bernanke said: "In order to create a more consumer-led economy, you need to improve the social safety nets, increase disposable income, and reallocate labor from the heavy industry sector to the service sector. I think that getting the monetary-fiscal mix right, in order to support the currency objectives, is consistent with the reform goals."

Yi said that the Chinese economy could see some of these consumer-oriented policies implemented in the future, but it will take time.

"It will take several years to finish this process. The difficulty is that China's saving rate is relatively high, probably one of the highest in the world," he said.

Yi emphasized a balance between the urgency of dealing with China's economic woes and avoidance of overreaction.

Bernanke said he was cautiously optimistic about the global economic outlook. "I agree with the governor that we are far better off than we were a few years ago. But growth overall is very disappointing for different reasons."

Allan Fong in Washington contributed to this story.