World Economic Forum

Lots of room for growth, Wen says

Premier assures global audience China will meet its 2012 target and that much development remains to be done in cities and rural areas

PUBLISHED : Wednesday, 12 September, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:00pm

Premier Wen Jiabao, in an apparent effort to bolster confidence in the country's economic growth, said the economy has great potential to generate long-term growth thanks to opportunities brought by urbanisation and innovation.

"I don't agree that, after 30 years' reform and development, China's growth has come to an end," Wen said.

"We may need more than 10 years, or even tens of years, to boost development in urban and rural regions."

He told an audience at the World Economic Forum in Tianjin that China is set to meet this year's growth target despite challenges posed by cooling domestic and external demand.

"We are sure to meet the development targets set for this year. We have the confidence," Wen said.

In March, Beijing lowered the target for annual economic growth to 7.5 per cent for the first time in eight years, showing its determination to reduce reliance on exports and investment in favour of domestic consumption.

"The reason we lowered the speed of growth is that we want to better transform our growth model and improve our economic structure," Wen said.

Despite that reduction, he said the economy still has great potential to grow in the future, given the huge gap between rural and urban incomes and the need to build infrastructure and develop education, culture and technology.

He said a banker once showed him a picture of underground pipe networks in a major world city, which was "as sophisticated as a spider's web" and dramatically different from the underground facilities in China's capital city.

Acknowledging the huge challenges facing the country's leaders in urbanisation and industrialisation, Wen said, however, that "all this means China is a country with huge potential, a huge market.

"We are fully confident in our development."

In an effort to show the government's willingness to act as needed to stem a further slowdown this year, Wen pledged that the government is ready to tap into its vast fiscal surplus as well as a stability fund to support demand.

Barclays Capital economist Huang Yiping said: "We think China is about to experience a transition from 'economic miracle' to what can be considered normal development in the next five to 10 years.

"This process will not only transform the Chinese economy but will also have significant implications for the rest of the world."

Huang said the key to that transition lies in the anticipated reforms in markets, including rapid wage growth, liberalisation of interest rates and exchange rates, and market-based resource prices.

Still, some economists have warned about a hard landing after economic growth fell to the slowest in three years last quarter.

Tim Condon, head of research at ING Asia, said recently that the country's economy may experience a hard landing this year.

"The lack of aggressive stimulus prompted our migration from the soft-landing camp to the hard-landing camp," Condon said.