China Development Forum | Vice Premier says rapid growth isn’t what economy needs

Vice Premier Zhang Gaoli

China doesn’t need the rapid economic growth of the past and will instead focus on tasks including returning the blue to Beijing’s skies, Vice Premier Zhang Gaoli told global executives gathered in the city for the China Development Forum.
“It is both impossible and unnecessary to maintain the very high growth of the past,” said Zhang, a member of the seven-man Politburo Standing Committee, the nation’s top decision-making body. “We’ve paid the price for that,” he said yesterday. “It’s not sustainable.”
China’s growth has cooled as officials rein in local-government debt, crack down on graft and strengthen environmental laws after economic expansion averaged about 10 percent annually over 30 years. Premier Li Keqiang’s targeted gain of about 7 percent in gross domestic product this year would be the smallest increase since 1990.
“Maintaining a growth rate of 7 percent for the next few years is not possible,” Nouriel Roubini, an economist who teaches at New York University’s Stern School of Business, said at the China Development Forum on Saturday. “The only way you could do so is by increasing further the amount of credit relative to GDP and that increase of leverage eventually is going to lead to massive losses.”
President Xi Jinping and other leaders describe the slowdown as a “new normal” and a “higher quality” of expansion. Yesterday, Zhang said reducing the growth rate is “prudent” as the government seeks to improve the economy’s structure and tackle challenges such as large wealth gaps between regions.
The country’s leaders unleashed an unprecedented boom by channeling millions of people from the countryside to factories making shoes, toys and electronics for export, and by spending on the roads, power plants and ports that allowed China to become the world’s largest trading nation. That model is no longer sustainable.
China’s advantages have weakened as labor costs increase, Zhang told the forum attended by chief executives including Microsoft Corp.’s Satya Nadella, HSBC Holdings Plc’s Stuart Gulliver, International Business Machines Corp.’s Virginia Rometty and Ford Motor Co.’s Mark Fields. International Monetary Fund Managing Director Christine Lagarde said in a speech that China “badly needed” structural reforms.
Separately, commenting on anti-monopoly cases, Zhang said the government won’t treat foreign companies differently than domestic ones. In February, Chinese regulators fined Qualcomm Inc. $975 million and set licensing rates for the company’s mobile-phone chip technology after finding it guilty of antitrust violations. Bloomberg

IMF welcomes Beijing’s efforts to boost regional investment

International Monetary Fund chief Christine Lagarde said yesterday that China’s economic slowdown is legitimate and that Beijing can contribute to global prosperity. Speaking at the opening of the China Development Forum in Beijing, Lagarde praised Beijing for its work to build a legal system and address pollution. She said she welcomed Beijing’s efforts to boost investment outside China, referring to the new Beijing-led Asian Infrastructure Investment Bank. She said China is “clearing the path to further engagement with the world through investment, trade and more participation in the multilateral dialogue.” China established the regional lending institution last year and put up most of its initial USD50 billion in capital with the goal to finance construction of roads and other infrastructure.