Business / Economy

Concerns over China's economic policies unfounded: leading economist

(Xinhua) Updated: 2016-04-09 10:31

GENEVA - Concerns regarding China's economic policies and relative market slowdown are entirely unfounded, a leading German economist and former UN official said, urging countries to accept China as a market economy.

"China is doing what a normal market economy would do," Heiner Flassbeck, former State Secretary in the German Federal Ministry of Finance, told Xinhua in an exclusive interview Thursday.

"It's absolutely normal for a country that is involved in open global trade to try and export more than before, that is what Germany did over the last fifteen years," added Flassbeck, who is also former chief of Macroeconomics and Development of the United Nations Conference on Trade and Development.

A number of countries are becoming increasingly alarmed regarding Beijing's industrial oversupply and its increasing exports.

China's decision to reduce imports has also compounded the situation for many countries who rely on exports to the Asian economic powerhouse.

As part of China's 13th Five Year Plan, policymakers in Beijing have opted to push forward structural reforms on the supply side by tapping strong domestic demand, simplifying government procedures and pursuing innovation-driven growth and hence quality growth at a higher level instead of the fast but low-quality growth of the past.

"The rules of free trade should apply to everyone," said Flassbeck, who reminded that overcapacity is normal for a country which had enjoyed a growth rate of around 10 percent for some 20 years.

"Over the last ten years, China has also dramatically cut its current account surplus," he said. "China did what was necessary to balance the global economy; other countries have not."

According to Flassbeck, as long as China's current account surplus does not reach 10 percent of its gross domestic product (GDP), which is around three times the current level, there is no cause for concern.

Nevertheless, protectionist measures against China are not justified as countries and regional blocs such as the European Union (EU) must adjust themselves to new economic realities rather than rely on China to provide them with a solution, he said.

He also suggested that China should be accepted as a market economy by the end of this year.

"In all the countries the government is intervening in one way or the other. In Germany we had in the past an intervention in a dramatic way in agriculture; Airbus would not exist without intervention of governments of all of Europe," he said. "China is as much a market economy as many other countries."

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