Source: Les Echos
Q: With the celebration of the 30th anniversary of Chinese economic reforms in full swing, many commentators worry about the country's dependence on exports and call for a rebalancing of its growth model. Do you agree with this analysis?
A: I believe that it is incorrect to say that China's economic growth has essentially been nourished, notably in recent years, by exports. The growth of trade surpluses in the past three years has resulted in overheating in the country, which comes on top of a strong base of domestic demand.
Q: But, if exports are not the main engine of China's economic growth, how can its deceleration be explained?
A: Launched exactly one year ago, the efforts of the government to wrestle with inflation are largely responsible for the current problems. Trade difficulties are adding to it and making the deceleration even more brutal.
Q: What should the Chinese authorities do to ensure that growth retains its momentum?
A: The Chinese have shown that they have the means to stimulate their economy. They have completely eliminated the problem of inflation and have a solid financial system to assist the stimulus. They should now encourage domestic consumption and domestic investment. The Chinese still have a capital stock per capita that is extremely low.
Q: Is the growth of social movements in the country cause for concern?
A: Of course, everyone is worried about social unrest, but it is inevitable in an economy that is experiencing rapid growth and wrenching restructuring. This trade cycle will result in a serious reorganization of underperforming firms in coastal areas. The government must manage this process in a balanced manner by distinguishing legitimate grievances from those that are not legitimate. That will not be easy, but it is necessary.
Q: If one were to project beyond the crisis, where do you see China in 30 years for the 60th anniversary of economic reforms?
A: It is almost certain that China's GDP will be greater than that of the United States by 2038. With this crisis, this catching up could occur even sooner. Maybe just before 2030, if the Chinese recover fairly quickly as I expect and if the United States experiences very slow growth for several years.
Q: To guarantee the momentum of its growth, is China going to need to urgently start political reform?
A: In China, political reform must contribute to social stability and must allow different voices in society to have more and more space for influencing decision-making. The election of national leaders is not the only, and perhaps not the main, criterion for democratic progress in a poor society like China's. If political reform is a necessary part of rapid modernization, it is not so urgent as to call into question the whole current system. That could have unfortunate consequences, in the long term, for the success of democratic reforms, which will come in their time, in the longer term, as the economic welfare of the population increases.