Opinion

China should be vigilant in post-crisis time: WB chief economist

(Xinhua)
Updated: 2010-03-04 16:14

WASHINGTON: The Chinese government should still be vigilant although it appropriately handled the global financial crisis in the past year, said Justin Yifu Lin, senior vice president and chief economist of the World Bank.

"The Chinese economy gave a good answer to the world last year, " Lin told Xinhua in an exclusive interview on Tuesday.

"The Chinese economy stood out among other economies in the world last year," said the 58-year-old Lin, who has been working as the World Bank's chief economist since June 2008. He is also the first Chinese who takes up this post for the Washington-based international organization.

China's gross domestic product, the broad measure of overall economy, recorded an 8.7-percent growth in 2009 in the circumstance of a 2.2-percent contraction of the world economy.

China has become one of the engines of the global economy, Lin said. He forecast that the world economy will grow 2.7 percent in 2010, in which China will account for about 30 percent.

He said the Chinese economy grew fast last year thanks to three reasons. Firstly, the Chinese government implemented a strong and timely fiscal stimulus policy. Secondly, China is a developing country, providing plenty of room for government investment. Thirdly, China has a big market which makes it relatively easy to increase domestic consumption.

He predicted that those favorable factors remain this year.

"I believe that the goal of eight percent growth in 2010 of the Chinese economy is possible," he said.

However, many challenges remain for China's economy, Lin said. Internationally, world economic recovery remains fragile. Domestically, asset bubble is likely to emerge with the heavy investment in China.

According Lin, the biggest challenge of all in China's economy is employment.

"Employment is the biggest challenge that the financial crisis brought to us," he said. "The society will not be stable unless the employment problem is solved."

"China is still facing severe pressure of employment. That is why the Chinese economy has to maintain a certain pace of growth," he said.

Another problem is income distribution, he mentioned. "But income distribution is also connected with employment."

"Income and employment are the two sides of a coin," he said.

If these two problems are not fairly addressed, the social income gap will be broadened.

The major source of income is salary for the low-income group, he said.

Still, for the current economic situation, Lin said he is always "relatively optimistic" about China. Yet he also warned China, among other nations, to be vigilant in the seemingly safe time.

Although the global economy started to recover, the foundation for recovery is still fragile, and there is the possibility of a crisis comeback, he said.

He took Greece as an example. When the economy is good, the government won't find debt a problem. But when the economy starts to decline, debt payment suddenly becomes a big problem, and is likely to lead to debt crisis.

"Any economy has its cycle," Lin said, "You must consider in advance whether you can pay the price when the economy is in a downturn."

He said the Chinese economy has a good development momentum with various favorable conditions. "But there are more to be improved. We have to use the period of time to improve the quality of our economy and turn the crisis into opportunity," he said.