Thursday, 12 January 2012Former International Monetary Fund chief economist Kenneth Rogoff says China faces a “dramatic slowdown” in the next decade as the economy adjusts to slowing global trade, worries about inflation, and a political transition.
Rogoff, speaking at a seminar for Thai bankers, said the country’s rapid growth, spurred by exports and spending on infrastructure and housing, is not sustainable despite efforts to manage the economy.
"You have to distinguish between [the fact] that they are doing a good job and whether they can manage things so perfectly," he said. "And I have said, and I would say again, that the odds of China having a significant growth slowdown over one of any given years [in the coming decade] is something like 10 percent."
After implementing economic reforms over the past three decades, China has had roaring economic growth. Last year its economy grew more than nine percent, but is now forecast to slow to around 8.5 percent expansion in 2012.
The global economic crisis and worries about Europe's debt crisis are hurting China's growth by weakening major advanced economies, which are key markets for the country's huge flow of exports.
Rogoff, now a Harvard University professor, called it "naive" to think China can avoid an economic downturn as it faces faltering markets, the challenge of inflation and a transition in political leadership in the coming year.
"It is a very risky situation," he said. "All of their growth strategies cannot possibly be sustainable, where you are investing 50 percent of GDP [gross domestic product]. There just are not projects forever that you can really collect on. What we know is you cannot grow your exports forever. Your country growing at 10 percent and your trading partners are growing much, much more slowly. You can do the arithmetic. It doesn't work."
Chinese analysts say the government is trying to "rebalance" the economy by promoting domestic consumption and higher wages. But Rogoff, who spoke as U.S. Treasury Secretary Timothy Geithner met with senior Chinese leaders in Beijing, hopes to narrow differences on trade and currency issues and press Beijing to back more sanctions against Iran.
U.S. officials say China’s currency is deliberately undervalued, which gives Chinese-made products a price advantage on world markets. China strongly denies that it is doing anything unfair. |
Thursday, 12 January 2012
Ron Corben for VOA News in Bangkok
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