How long will the current global economic slowdown last? China lowered its GDP growth target for 2012. How will this influence the world economy?
The annual global economic growth rate was 3.3 percent from 1980 to 1991, 3.5 percent from 1992 to 2001 and 4.5 percent from 2003 to 2007, according to the International Monetary Fund. Since 1990, there have been two imbalances for the global economy: the IT industry's revolution and its bubble in the 1990s and the virtual economy's upturn and downturn from 2003 to 2007.
In the future decade, we won't see a fast economic growth worldwide because there won't be major technological breakthroughs like the IT revolution in the next 10 years, or irrational prosperity brought about by global financial bubble, just like we experienced in 2003.
China lowered its GDP growth target for 2012 to 7.5 percent, according to Premier Wen Jiabao's Government Work Report during this year's full session of the National People's Congress. China's slower growth, I think, is an inevitable trend. That's because of the end of China's low-cost advantage, and an irrational prosperity period and the WTO entry effect for the country.
However, as long as China can maintain its steady and sustained development, it will continue to make a huge contribution to the global economy.
China is always accused of violating foreign trade rules by the United States and other countries. How should we cope with this problem?
The main purpose for the United States to push forward globalization is that it can enjoy the benefits it brings about. But now, the United States thinks globalization has gone out of its control. Hence, it hasn't enjoyed as many benefits as it had expected, and China, on the other hand, has gained a lot from globalization.
Since the financial crisis in 2008, the United States has shifted the emphasis of its policies and strategies from getting access to foreign markets to harping on the trade policies of their partners. It checks whether laborers are paid to international standards, whether there are sweatshops, whether companies have paid for pollution and whether perfect copyright protection policies have been enforced. The United States is re-establishing international trade rules according to its own rules, which ensure that 55 percent of the profits of U.S. outbound investment will go back to the United States.
China should adhere to globalization, adopt multi-lateralism and oppose any kind of trade protectionism. Meanwhile, it will actively accelerate the transformation of its development pattern and enhance overall competitiveness by adjusting its export-oriented mode and intensifying the internationalization of its talent pool, capital market and industries.
How can China make better use of its large amount of foreign exchange reserves?
China has over $4 trillion in outbound financial assets, among which only 7.5 percent is outbound direct investment and $3.2 trillion, or 70 percent of the total, is in foreign exchange reserves. China needs to adjust the structure of its outbound financial assets step by step. Because foreign exchange reserves can only be used for foreign trade and investment, it can be used for pushing forward the "going out" strategy of Chinese companies by supporting their global investment, production, sales and services.
Also, the reserves can be used to accelerate the transformation of domestic industrial structure and to import energy and resources badly needed by China to form its own reserves of energy and resources. Moreover, it can be used to help China improve its external environment and enhance its soft power.
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