A significant US economic slowdown could help China become
consumer-driven rather than export-oriented, economists said.
But they warned it would be a difficult process, as domestic
demand could drive up prices - especially in areas where markets
are less efficient.
Wang Qian, an economist at JPMorgan Chase Bank, said domestic
consumption is becoming a bigger factor in the nation's economic
growth.
"Though a possible US recession would drag down other economies,
China would be the exception, as a US-led economic slowdown would
pressure the nation to expedite economic restructuring," Wang said.
"Of course, without a US slowdown, China would also be on the way
toward balanced economic growth, but the process could take much
longer," she said.
But increased domestic demand for a wide range of goods and
services may not be met by a less-than-efficient supply system that
is sometimes distorted by bottlenecks. This would lead to the
irrational price increases that cause CPI fluctuations.
"If China's exports to the US and other European countries start
falling, domestic consumption will become a major force to sustain
the nation's economic growth," said Shen Minggao, an economist at
Citibank China in Beijing.
"A transparent market is needed to ensure supply is not easily
disrupted by profiteering and to get CPI growth back to an
acceptable level," Shen said.
"Taking effective measures to rein in inflation should be the
government's prime focus in 2008."
Many economists are calling for an efficient supply and
distribution system to match higher domestic demand.
Zhao Xijun, a finance professor at Beijing's Renmin University
of China, said more effort was needed to structure consumer
products to cater for wide domestic demand.
Economists said a smaller trade surplus resulting from lower
export growth to the US would also help alleviate pressure on
renminbi appreciation in 2008.
Stephen Green, head of research at Standard Chartered China,
told China Daily: "A more severe US slowdown, which drags
export growth below 15 percent year-on-year, would increase the
chances of a slower renminbi appreciation rate."
Jonathan Anderson, UBS Securities' chief economist for Asia,
doesn't expect China's trade balance to fall this year, but said
the surplus will peak in the next few quarters. That would mean a
long-awaited slowdown in headline GDP growth, as rising net exports
contributed more than 2 percentage points to real growth in 2006
and 2007.
(China Daily January 24, 2008)
