Economic slowdown puts peaceful rise in focus

SHANGHAI -- An economic slowdown will be a defining feature for China in the coming decade, testing the wisdom of its new leaders and shaping future diplomacy, according to experts.

The country's economic expansion is expected to slow to a year-on-year average of 7.2 percent between 2011 and 2025, said Li Xuesong, deputy director of the Institute of Quantitative and Technical Economics, Chinese Academy of Social Science (CASS).

At a presentation at the ongoing 5th World Forum on China Studies, Li's econometric models forecast slower GDP growth than the country's 13-year low of 7.8 percent in 2012.

"Optimistic calculations suggest growth at 8.2 percent, while a pessimistic one suggests 7 percent, between 2011 and 2015, and both figures will continue to decline over the next two five-year periods," Li said.

The downturn can be put down to slower growth of the labor force, weak inflow of foreign direct investment and the impact of a lackluster global economy, according to Li.

China's GDP growth has entered a downward spiral since 2009 as the unfolding financial crisis dwindled external demands, a prominent engine behind the country's fast-track development in past decades.

Experts said the economic slowdown may threaten social stability and cloud the pledges of President Xi Jinping, who came into office earlier this month, to restore social justice and close the wealth gap.

"I think the most immediate challenge for China is to make a successful transition from an export-driven economy to a consumption-driven one, which will turn on the true engines of China and the world economy," Gustaaf Geeraerts, director of the Brussels Institute of Contemporary China Studies, told Xinhua.

Geeraerts said a stumbling economy will weaken China's ability to tackle other problems like environmental protection and political reforms. Growing wealth, he said, can help nurture innovation and liberal minds that are conducive to social reforms.

China's policy makers, however, may find their task to be hindered by obstacles like an aging population, a lack of innovation and the rising costs of environmental degradation.

Chi Hung Kwan, a researcher at Tokyo-based Nomura Institute of Capital Markets Research, told the forum the shrinking labor pool as a result of an aging society and higher wages brought by the Lewis turning point (when cheap labor stops flowing from rural to urban areas), among others, will lower China's economic prospects.

The two demographic trends usually happen at different income stages, giving a country more time and policy leverage to respond. China, unfortunately, is facing the two at the same time, Kwan said.

Yet despite the disturbing predictions, there are still optimistic economic indicators.

Huge demands created by urbanization, the country's ambitions to lift backwater regions into prosperity and the huge potential of household consumption will continue to add steam to economic growth, Li Xuesong said. GLOBAL REPERCUSSION

With increasing its international clout, the question of whether and how China will steer its future economy is one of significance.

"What is needed for the development at home defines the contours of a country's policies abroad," Geeraerts told the forum. "Sustainable economic development in a peaceful way may be the final goal, but it can not be realized without secured access to strategic resources and safe trading routs."

But Geeraerts added that China's goal of keeping its economic engine running in a sustainable way also requires stable relations with its neighbors and the global community.

He urged the China to steer its development in a way to reassure other countries and dispel their qualms about its rise, withholding them from moving to balance or contain the country.

Yet another dilemma may arise from inward-looking proclivity -- focusing on its domestic economy and direct its diplomacy toward this end -- and the rising expectations for it to assume more responsibilities on the global stage.

Zheng Bijian, former executive vice president of the Party School of the Communist Party of China Central Committee, said the country will in the coming decade enlarge "converging points of interests" and "communities of interests" with other nations while devoting more efforts to domestic development.

The "peaceful rise" concept, as Zheng puts it, will find its roots in the goals of China's development in the second decade of the 21st century, when the country is set to encounter "a number of serious challenges" domestically.

Geeraerts agrees. He said China can not fully take up its international responsibilities while leaving tremendous difficulties at home.

It is most likely that China will opt for an evolutionary path, one that allows the country to focus on domestic construction while gradually accepting more global commitments and pragmatically implementing its own vision of global order, Geeraerts added.