Business / Economy

Domestic demand, innovation to maintain China's economic growth: Russian expert

(Xinhua) Updated: 2016-04-28 11:09

MOSCOW - China's economy can maintain its growth with a focus on innovation and consumption while shifting away from large-scale exports supported by cheap labor, a Russian expert has said.

"If the Chinese economy really relies on conquering the domestic market, I believe it will be capable of maintaining a rather high rate of economic growth in the medium term," Petr Mozias, an economist from the National Research University's High School of Economics, told Xinhua in a recent interview.

He said the Chinese economy was slowing down and entering a stage which Chinese economists have called a "new normal."

The Chinese economy has in many ways exhausted its structural growth possibilities as labor costs rise, rendering exports became less competitive.

Meanwhile, years of accelerated growth resulted in excess capacity as well as financial disproportions, primarily huge corporate and local government debt.

Mozias said many Chinese and foreign economist forecasted that the slowdown of the Chinese economy would continue and economic growth in China would be around 4-4.5 percent by the beginning of next decade.

"But I don't think this will definitely happen, as the Chinese economy is not simply slowing down, but important positive changes are taking place," he said.

He noted that there was a rise in business confidence and industrial output in the first quarter of 2016, which indicates that the Chinese economy might stop slowing down, or even accelerate in the coming months.

China's services sector is developing rapidly and has overtaken the processing industry in economic growth, which in turn has pushed up people's incomes and private domestic demand, Mozias said.

The Chinese government and companies have also paid much attention to innovation and development of Chinese technologies, he added, calling it another positive for the country's economy.

According to Mozias, the Chinese economy must pass through a period of restructuring and rebalancing.

Yet he added that as a large country, China can achieve sustainable economic development and tap the enormous possibilities in domestic demand.

Mozias pointed out that the rate of economic growth in China remained one of the highest in the world.

Compared to the stagnation in Europe and Japan, the Chinese economy is still the "global driving engine of economic growth," he said.

China's development in many ways provided lessons to Russia, which needed to abandon its previous focus on the export of raw material and to develop primarily innovative and hi-tech economic sectors, Mozias said.

Still, he said companies in both countries share the common problem of not innovating enough and suggested China continue institutional reforms to force companies to pursue more innovative technologies.

"The well-thought participation of the state in the economy and implementation of development policies are the positive components of the Chinese (development) experience," Mozias said.

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