Economy faces tricky balancing act in 2010

• Source: Global Times
• [21:27 December 29 2009]
• Comments

"There were massive job losses in some provinces, especially along the east coast, but this is positive in the long run because it forces those provinces to restructure their economy." -Gilbert Van Kerckhove

"We should contain local governments' greed and prevent them from forcing up land prices."-Ding Yifan

Editor's Note:

China emerged as an undeniably great economic power in 2009, but there were still doubts. China has been praised for its efforts in dealing with the economic crisis, but its underlying economic structure has been criticized both outside and inside the country. Ding Yifan (Ding), a researcher with the Development Research Center of the State Council and Gilbert Van Kerckhove, a Belgian economic consultant who has been in China for over 25 years, talked with Global Times (GT) reporter Li Yanjie on China's economic performance in 2009 and expectations in 2010. Van Kerckhove previously worked as senior advisor for the Olympic Economy for the Beijing Municipal Government and now a managing director of Beijing Global Strategy Consulting Co, Ltd.

GT: As we near the end of 2009, how do you assess China's economic perfor-mance?

Ding: The Chinese economy in 2009 fell at the beginning of the year and then rebounded, and it proved more adaptable than people thought it was. However, the provinces that were reliant on exports, such as Guangdong, were impacted much more greatly by external shocks.

Van Kerckhove: China is one of the few countries that has escaped major turmoil. Other countries have had quite a number of problems. Of course there has been some fallout from the financial crisis, but overall China's economy has been performing pretty well.

GT: Measures on restructuring industry haven't generated the expected results. What policies would you propose should be pursued next year to achieve restructuring?

Ding: At present the effects of readjusting the industrial structure have not been fully demonstrated. An obvious problem is that many enterprises with production overcapacity, such as small coal mines, were closed, but this led to electricity shortages in the winter.

It will be three to five years before the comprehensive readjustment of the industrial structure meets with results.

The current policy direction is correct, but the government needs to provide more support.

The financial crisis indicated that market guidance is not enough, and that the government should tell enterprises where the development opportunities are, and provide financial and technological assistance.

Van Kerckhove: Well, we had the new labor law. Hong Kong reacted against it because many companies there have factories in Guangdong Province, and they complained because of the labor law, their costs were going up.

But that was actually the central government's plan; the aim was to increase the flow of money to workers to boost domestic consumption, and to force industries to move away from cheap products to more high value stuff.

The restructuring may be slow, and there were massive job losses in some provinces, especially along the east coast, but this is positive in the long run because it forces those provinces to restructure their economies.