Will the Chinese Economy Slow Down?

HONG KONG - September 7, 2011

A slowdown in the Chinese economy is a good thing, says influential Chinese economist, Fan Gang, Director of China’s National Economic Research Institute. Speaking as part of the ANZ-Asia Society China Series, the advisor to the People’s Bank of China’s Monetary Policy Committee remarked, “I’m quite confident that the economy is soft landing at the moment, and I believe it’s good for the Chinese economy in the next couple of years.”

Dr. Fan said he hoped that China’s growth rate could continue at a more sustainable rate of  between 7 and 8 percent for another three decades. “The reason is, we are still far away from completion of industrialization, urbanization and modernization. There are still at least 200 million rural labor force depending mainly on agriculture. Without further job creation of around 6 to 7 million a year, China will always continue to have a group of people living in poor standards and the social disparity will continue to enlarge rather than narrow.”

The economist said such growth targets were possible, and relied on job creation job relocation. “Labor is not that cheap compared to the past 30 years but we have other factors such as education and research - all play a role. 30 years ago Chinese companies were not innovative - just beginners, they were just trying to catch up. They tried to be closer to the frontier, they tried to learn and copy. That’s a process of progress, In the next 20 to30 years, that plays a bigger role.

China, he said, had to avoid and manage financial, economic and social crises. “Income disparity, social disparity, low consumption, low income. That’s the trouble spots. Those are real trouble for a developing country.” Dr. Fan did not rule out the possibility of social unrest. “As long as the growth continues, as long as the poorest still have hope tomorrow that a family member can get a better job, then things are basically stable. That’s why I hope we continue to have growth, continue to have job creation and labor relocation - not only for economic sake but also for social stability.”