NEW YORK: The World Bank's chief economist is pinning his hopes of China's successful development in the coming years on a decrease in the country's huge income disparity.
The income disparity, at 0.48 measured by the Gini Ratio, has become larger and larger, causing other imbalances such as savings and investment imbalances and an external imbalance, Justin Lin Yifu, chief economist and senior vice president of the World Bank, told a China 2010 economic forecast meeting held on Thursday at the New York Stock Exchange.
"It's very important for China to complete the transition to a market economy to remove all the distortions in the financial sectors and in natural resources sectors," Lin told a gathering of hundreds of businessmen and academics, sponsored by the China Center for Economic Research (CCER) of Peking University and the National Committee on US-China Relations.
"Those reforms will allow China to develop the sectors with consistently comparative advantages, create more jobs, increase the income of common people, reduce income disparity, and reduce the saving and the consumption imbalance, as well as the external imbalance."
If China can do that, China could possibly continue its economic growth in the coming decades, he said.
"China can also contribute to solving global trade imbalances in the years to come," said Lin, the first World Bank chief economist from a developing country.
Meanwhile, he said that the appreciation of the Chinese currency will not help solve the China-US trade imbalance.
"The types of products China exports to the US are labor intensive, where China has a bigger advantage. The imbalance between China and the US reflects the different stage of specialization," he said.
Others were also optimistic about China's future growth.
Lu Feng, an economist and deputy director of the CCER, said: "If China continues to grow at this rate, China is likely to surpass the US by 2021-2022, but definitely before 2025."
However, China will still be a poor country in the per capita sense, he said.
China's economy will grow nearly 10 percent this year, based on a study by 11 leading domestic and international financial institutions such as the Chinese Academy of Social Sciences, CCER, Morgan Stanley and Merrill Lynch, Lu said.
While sharing the optimism, Qin Xiao, chairman of China Merchants Group, called for new reforms to transform government function, deregulate price controls, promote market competition, reform the State-owned enterprise (SOE) system and promote privatization of SOEs, as well as accelerate political reform.