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Print Edition> Business
UPDATED: January 27, 2011 NO. 5 FEBRUARY 3, 2011
Observer: Challenging the Trend

GREEN FOR GROWTH: Farmers in Haiyuan County, Ningxia Hui Autonomous Region take care of potatoes in a greenhouse. China must develop modern agriculture in an effort to rebalance its economy (TAN HAISHI)

The financial crisis is reshaping the world economic landscape. For China, it's now necessary to adapt to this new trend and rebalance its economy. Li Yang, Vice President of the Chinese Academy of Social Sciences, discussed these issues in an article recently published in the Economic Information Daily newspaper. Edited excerpts follow:

The sweeping financial crisis may become a significant turning point for the world economy to form a new pattern. I made this conclusion based on my observations in the following two areas.

First, in real economic sectors, emerging economies have made greater contributions to global output growth than their developed counterparts since the late 1980s. After the financial crisis, this trend—developed economies' sluggishness and emerging economies' continued growth—will become irreversible in the long term.

Emerging economies will take the lead in stimulating the world economy and put a dent in the past globalization pattern that has previously been dominated by developed countries.

Second, changes will also occur to the financial industry. Past financial crises often occurred with debt crises of developing countries and emerging markets. Recovery from the crises often meant a global restructuring of debts, which further consolidated developed countries' core position in the world economic and financial areas. But this time is different. Those stuck with debt crises are developed economies, which are calling to their emerging counterparts for help. That's why the G20 was created.

For China, the road ahead is not without daunting challenges. In the scheme of international economic affairs, China has played a special and complicated role.

The country benefited from the current world economic order—international division of labor, free trade, relatively loose capital control and a relatively stable U.S. dollar. What China has achieved in the past few decades has been realized by a high dependence on this old global pattern dominated by developed economies, which has since become uncoordinated, unbalanced and unsustainable.

Now, it's time to wean off the reliance and adjust the economic structure on our own.

Developed economies will need a long time to recover. Economic rebalancing of emerging countries such as China will also be a gradual and prolonged process, and its success depends on our determination to accelerate the economic rebalancing and pursue better growth quality.

Currently, China enters a strategic period, during which it is able to push forward the rebalancing while maintaining fast growth due to three major reasons.

First is a solid foundation. Thirty-two years of the reform and opening-up policy have put the economy on a firm footing—high savings rate, vibrant investments, buoyant exports, deep foreign exchange reserves and relatively low inflation. These factors having propped up China's robust growth still exist.

Second is a favorable external environment. Peace, development and cooperation remain trends of our times, and international unrest that can affect China is less likely in the foreseeable future.

Third, China is increasingly merging into the world economy and has bolstered its status in the international community.

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