Experts Discuss China’s Economy at 2008 Summer Davos Forum
At the 2008 Summer Davos Forum held in Tianjin, China, on Saturday 27 September, Chairman of the China Banking Regulatory Commission (CBRC), Liu Mingkang, told business leaders that international cooperation is needed to address issues relating to the current global financial situation. Referring to the $700 billion bailout plan that the U.S. is proposing to assist troubled financial institutions as “fast food”, Liu emphasized the need to support China’s “slow cooking” long-standing regulatory policies.
Liu estimates that China’s economy will increase at a rate of between 9 and 9.5 percent. While being lower than the 11.9 percent enjoyed by the economy last year, in the light of the current global financial instability, the forecast growth is still good, reflecting optimism for the continued strengthening of China’s economy. Among the reasons given for China’s sustained growth is the fact that, with a population exceeding 1.3 billion, domestic consumption is steadily increasing, which compensates to a degree for the slowdown in China’s exports caused by a decline in demand from developed markets. This increase in domestic demand is driven in part by the large-scale industrialization and related urbanization taking place in China, resulting in an enormous demand for infrastructure and construction.
Liu also indicated that China is open to offering opportunities to financial talent that may be laid off as a result of the major restructuring taking place on Wall Street. This suggestion met with approval from major bankers participating in the 2008 Summer Davos forum, otherwise known as the Annual Meeting of the New Champions 2008.
Acknowledging that the U.S. financial market does not stand alone, but impacts the world financial market, Guo Shuqing, chairman of China Construction Bank, noted that what is good for the U.S. is, in turn, good for other countries, including China, and called for closer collaboration between central bankers of foremost economies. Senior vice-chairman of Citigroup confirmed that Chinese authorities, including representative of the People’s Bank of China and the China Banking Regulatory Commission, have been in consultation with the U.S. Federal Reserve on setting a series of measures in place to limit the impact of financial crises.
Steps already taken by China’s authorities include an interest rate cut, a reduction in banks’ reserve requirements and higher value added tax (VAT) rebates in market sectors that have been most affected by falling trade volumes, as well increased spending in improving infrastructures. While accepting that the stock markets in Asia, China included, are affected by the global financial turmoil, analysts generally agree that the region is in a position to take full advantage of the markets when the global economy stabilizes.