Anti-corruption crucial for China's long-term growth: Nobel laureate

Michael Spence, laureate of the 2001 Nobel Prize in Economics, speaks at a conference in Beijing, China in this?Dec 15, 2011 file photo.?[Photo/IC]

WASHINGTON - China's massive anti-corruption campaign will affect economy for a short term, but is crucial to maintaining growth in the long run, Michael Spence, a Nobel Prize winner on economics said Wednesday.

The anti-corruption campaign has essentially displaced some reform agenda for a short run and caused the bureaucracy "frozen," said Spence at a seminar titled "Challenges of Job-Rich and Inclusive Growth" held by the International Monetary Fund (IMF).

Spence said: "I don't think one should assume this is a failure at all but rather a very important first step and my expectation is it will get pretty decent healthy structure change and healthy growth prospect in China."

He believed there are three reasons for China to pursue the anti-corruption campaign "aggressively."

Corruption is "a major source of social tension" and state-owned assets have too much power to the economy compared with the growing private sector, Spence told Xinhua on the sidelines of the seminar.

"And third, a lot of reforms require an efficient and honest bureaucracy at multiple levels. So they have to kind of clean up first," said Spence.

Spence said real estate posts the biggest risk for the Chinese economy right now.

"If there were crashes in real estate values because of excessive tightening, then that will have a big effect on households' balance sheet and on consumption and you can see a really big growth slowdown," he said.

But Spence said "I don't think it's most likely the outcome," adding the current losing momentum for China's real estate market is still on an acceptable level.

Spence also suggested China invest more in public service sector like education and health care, which will help China's consumption play a bigger role in economic growth.