Tuesday, January 30, 2007

‘China to Continue on Prosperity Path’


Tuesday, 30, January, 2007 (11, Muharram, 1428)

Tang Li, Arab News

30 January 2007 — China is set to continue its rapid economic growth
and that will greatly benefit the Asian region and the global economy,
said the International Monetary Fund’s (IMF) managing director, Rodrigo
de Rato, who was on a visit to Beijing. During his visit, de Rato met
Chinese Prime Minister Wen Jiabao and also had discussions with China’s
finance minister, Jin Renquing and governor of the People’s Bank of
China, Zhou Xiachuan.

De Rato praised the Chinese government
for its efforts in creating jobs and reducing poverty. He noted that
sustaining China’s continued rapid growth was a challenging task and
the IMF, “agreed with the authorities that this requires rebalancing
the economy away from its current heavy dependence on investment and
exports and towards consumption. It also requires that prosperity be
shared more equally across society, including by addressing the
rural-urban income discrepancies. Equally important is to ensure that
economic development is environmentally sustainable.”

The IMF’s
managing director praised China for its awareness of the task at hand
in addressing the issues of sustaining GDP growth, ensuring greater
wealth distribution and providing economic growth at an environmentally
sustainable manner.

China is currently working on curbing rapid
credit and investment growth to prevent overcapacity in certain
sectors, and to put growth on a more sustainable footing. Another
challenge for the Chinese economy has been to strengthen its financial
system in order for China’s large savings pool to be channeled to more
efficient uses. De Rato said he welcomed the moves by the Chinese
government to develop a stronger financial system and capital markets
and noted,” To increase consumption and reduce savings, China’s
households need to be reassured of adequate provision of health care,
education, and pensions, with a shift in public expenditure to these
areas. I strongly support the authorities’ plans to move forward with
far-reaching reforms on these fronts.”

The topic of China’s
exchange rate policy was also discussed. In recent years, the exchange
rate between the Renbinbi and other currencies, particularly the US
Dollar has been a sore point between Beijing and its major trading
partners, particularly the US. De Rato praised the Chinese government
for reiterating the objectives of advancing exchange reform and greater
flexibility over time for the renminbi.

He said, “Faster movement
would provide the authorities much needed room to rely more on monetary
policy to manage the economy, particularly to contain the rapid credit
and investment growth. Greater flexibility in the exchange rate and
interest rates is also important for rebalancing the economy. In
addition to providing better price signals for investors, the likely
higher interest rates and more appreciated exchange rate in the near
term would also help to boost household consumption by increasing
household income and wealth.”

The IMF’s managing director
expressed his confidence in China’s ability to continue on its path of
rapid economic growth and he said, “China’s continued economic success
and stability have become more important for other countries-in the
region and worldwide. With the vision of its leadership and their
resolve to tackle the challenges that China faces, I am confident that
China will continue on its path to achieve greater economic prosperity.”

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