by Xinhua writers Xiong Maoling, Gao Pan
WASHINGTON, Jan. 21 (Xinhua) -- China's economy has not reached the point where a slowdown is "inevitable," and it could grow fairly fast for another 10 years with continued market-oriented reforms to boost economic efficiency, a U.S. economist and longtime China watcher has said.
Nicholas Lardy, a senior fellow at the Washington-D.C. based Peterson Institute for International Economics, told Xinhua in a recent interview that China still has huge potential in economic growth if it continues to implement market-oriented reforms.
The veteran expert on the Chinese economy suggested China enhance its financial reform and further reforms on state-owned enterprises, improve the efficiency of capital allocation, allow more bankruptcies to eliminate money-losing firms, and encourage more market-driven mergers and acquisitions.
Refuting the argument that an economic slowdown in China is inevitable and natural, Lardy said China still has "substantial potential" for growth.
"China today is roughly where South Korea, Japan were when they began the period of rapid economic growth," he said. "There should be a substantial potential for further convergence."
The argument that China could follow Japan's path into economic stagnation is also rejected by Lardy, who believes the comparison is "misleading."
Japan's economic slowdown began "when the potential for convergence was to a considerable extent already exhausted or used up," while China is not at that point, he argued.
With the right kind of policies, China could prevent itself from going down that road, Lardy said. He suggested China take a gradual approach in deleveraging, and try to strike a balance between preventing financial risks and maintaining stable growth.
Looking ahead, Lardy believes China, with a huge domestic market, could grow rapidly based on domestic demand, instead of exports.
"If they are successful in shifting towards more consumption, private consumption, I don't think there's a conceptual reason why they couldn't continue to grow fairly rapidly for another 10 years," Lardy said, suggesting that disposable income would be one of the most reliable indicators to gauge China's economic growth going forward.
"One of the most important pieces of data that doesn't get enough attention to is the growth of disposable income, because ultimately that's the driver of consumption and we're now in an environment where consumption is the dominant source of China's economic growth," he said.
