Nation told to bolster domestic consumption

By Jin Rong (China Daily)
Updated: 2006-11-04 09:56

China should move away from its heavy reliance on exports and boost domestic consumption to achieve balanced growth in the long run, a former US Federal Reserve chairman said on Friday.

"The performance of the Chinese economy in the past 5 to 10 years has been historically remarkable, even by earlier Chinese standards," said Paul Volcker, former chairman of the Board of Governors of the US Federal Reserve System.

"To continue to grow nearly 10 per cent year after year is an enormous achievement," Volcker said.

The former US Federal Reserve chairman, who held the post from 1979 to 1987, said there needs to be some rebalancing in the Chinese economy if it is to maintain healthy growth in the long term.

"I do think the economy has reached a point where some rebalancing is probably necessary," Volcker said in an interview on the sidelines of the 10th annual BusinessWeek CEO Forum, which ended in Beijing on Friday.

In particular, the former Federal Reserve chairman said China should expand internal consumption to drive its growth.

"There should be more room for consumption and a little less for investment to get a more balanced growth over time," Volcker said.

Su Ning, deputy governor of the People's Bank of China, sounded the same alarm on Thursday at the forum.

According to Su, the share of domestic consumption in the national economy has been on a downswing since the l980s.

The proportion has slumped from 62 per cent in the 1980s to 52 per cent last year, a trend that Su said may pose problems for economic development.

"And moving towards more internal consumption will also help solve the imbalance in the external side," Volcker said.

The central bank's Su also identified the balance of payments as one of the problems nagging China's economy.

China's foreign trade surplus hit US$109.9 billion in the first nine months of this year.

Exports jumped by 30.6 per cent year-on-year in September to US$91.64 billion.

"It is in the interests of China itself and the world that it moves away from excessive reliance on exports," said Volcker, who once headed the UN's Independent Inquiry Committee into its Oil-for-Food Programme.

The former US Federal Reserve chairman suggested there should be more restraint on the monetary side.

"There are many instruments to do that," he said, without going into detail.

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