接受新加坡电视台ChannelNews Asia的采访稿（2010-12-2）

  Q:  What is/are your growth forecasts for China in the next year 2 - 3 years?

(if it goes up to 10% - why?  if it goes down to 8% for example - why?)

I am very optimistic about China’s long run growth prospect, but I don’t like to do short-term forecasting because GDP growth depends on a lot of things. If I really have to make a guess, I think China can maintain a growth rate around 8-10% in the next few years.

Q:  What do you think the main drivers of this growth?

(would this pattern of future growth differ from the past?)

It has become popular recently to talk about the drivers of economic growth in China. People are saying that China’s growth has been driven by export and investment, not consumption, and that China needs to make a transition to a domestic consumption driven growth. But these statements are actually very misleading, and strictly speaking they are wrong. In economics, there is no such a concept as consumption-driven economic growth.  

Academic economists distinguish between long term economic growth trend and potential and short-term growth fluctuation. In the short run, when an economy is in recession and has a lot of unused productive capacity, more consumption, or investment or export will be good for improving  current year GDP growth rate. But when an economy is already growing at full speed and there is an inflationary pressure, which is the current situation in China, more consumption would only lead to higher inflation.  

In the long run, a country’s economic growth cannot be driven by consumption. Quite to the contrary, high savings and investments lead to fast economic growth. Productivity improvement is another important factor. If consumption can drive a country’s growth, there would be no poor countries in the world.  

At some point, when China gets richer, and the rate of investment goes down, there will be less investment and more consumption in the composition of GDP.

Q:  What is the sustainability of the growth?

When you really mean sustainability, you must be talking about long run growth. Remember that consumption cannot sustain growth. It’s the savings that sustain growth. China has one of the highest saving rates in the world, and due to the catching-up effect, China’s productivity also grows fast. These two factors will sustain China’s rapid growth for still many years to come.   

Q:  How do you think the government can achieve this pace of growth and still contain inflationary pressures?

China has been achieving around 10% growth since 1997 without major inflation threat except for 2007. This means China’s potential growth rate is 8-10%. As long as it is not much higher than 10%, the inflationary pressure will not be big.

Q:  What's inflation going to be going forward in 2011?  And what's the effect of stability on China? (currently, inflation is at 4.4%, if it goes up or down - why?)

Again, it’s hard to make an accurate forecast about the inflation rates. But, since mid-1990s, China has been able to control inflation quite effectively, sometimes too effectively. The government’s ability to control inflation has improved a lot. It has many tools at hands, such as raising the currently very low interest rates, raising required reserve ratios, appreciate the currency faster, freezing prices of some of the government controlled goods and services and moral persuasion.  

Q:  Do you think the government has so far been successful in containing inflationary pressures in the system?

Overall, I think yes. The government probably has been a bit too slow to raise the interest rate. It is probably because the government may not want to attract hot money that speculates on RMB appreciation. Because banks are state-owned and interest rates are determined by the government, China can somehow maintain low interest rates while reducing money supply.  

Q:  China has recently overtaken Japan as the second largest economy.  What do you think are the implications of that in the global financial and trading landscape?

Becoming the second largest economy only has a symbolic meaning. In PPP terms, China became the second largest economy some years ago. It is not like China has been able to grow fast up to this point without getting noticed. Indeed, many, including myself, would predict that China will become the largest economy by 2020. As a result, China’s share of global financial services and world trade will become no. 1 too. Any business that can claim to be global must have a presence in China.

Q:  Based on China's actions so far, what kind of player do you think China is shaping up to be on the world stage?

Obviously China’s voice will be heard. China will become more involved in world politics. Some in the West seem to believe China’s rise is a threat to the them or even to the world as a whole. But China is still a developing country, and still relatively poor, and so you shouldn’t expect China to do everything in the same way as a rich developed country. As a result of its rapid economic growth, all other aspects of China will change too such as political and social institutions. As China becomes richer, there is a good chance that China will become freer, more democratic and even more equal. And China will play a larger positive role on the world stage. The world is now so integrated, and China is such an open economy; so there is no way that any country can impose a unilateral order on others.