China faces increased constraints from sources of labour and raw materials and must accelerate structural adjustments to sustain growth, the country's top statistician said on Saturday, joining the chorus of calls for faster economic reforms. The world's second-largest economy also faces environmental issues, Ma Jiantang, head of the National Bureau of Statistics, told an economic forum.
The economic slowdown, he said, was caused by slackening external demand and deep-rooted domestic problems. "The advantages that have supported China's fast economic growth in the past 30 years are weakening and constraints are rising," Ma said. "Constraints on China's economic growth are increasing. There is only one way out - we need to further strengthen our efforts to change the economic model and adjust structures to help sustain relatively fast growth."
--- Central bank adviser sees huge challenges in structural shifts
China's demographic dividend that has partly driven the economy's 10 percent annual average growth over three decades is diminishing as the surplus labour pool declines, he said. The proportion of the labour force relative to the total population fell for the first time in 2011, Ma said. Annual economic growth is widely expected to slow to just over 8 percent in the first quarter from 8.9 percent in the previous quarter - the fifth consecutive quarter of slowdown.
Ma said weakening economic activity in the first two months "was within the normal range" and he remained confident on the economic outlook for 2012. Premier Wen Jiabao cut China's 2012 growth target to an eight-year low of 7.5 percent and vowed to wean the economy off dependence on government-backed infrastructure and exports while boosting consumer demand. The World Bank said in a recent report that China must embrace structural reform and move towards free markets to help sustain growth over the long term.
Many Chinese academics are beating the drum for deepening economic reforms and steps to tame state conglomerates, which strengthened dominance in key sectors after Beijing's 4 trillion yuan ($632.64 billion) stimulus package launched in 2008. Reforms, which were launched by former leader Deng Xiaoping in 1978 and gained steam after China's entry into the World Trade Organisation in 2001, is losing steam, they say.
State-owned firms have staged a come-back at the cost of private firms as they received the bulk of Beijing's massive spending, sparking criticism that "the state advances and the private sector retreats". Qian Yingyi, a professor of economics at Tshinghua university, said Beijing faced huge challenges to push through structural shifts due to the state's elevated role in the economy thanks to its forceful response to the global crisis.
The financial crisis had fuelled doubts about the importance of market forces among many Chinese, he added. "On the surface, many countries have taken a hit from the financial crisis and China has done a good job in coping with it," said Qian, who has just been named an adviser to the central bank. "But I think that the crisis has inflicted huge damage on China, not just structural problems, but also on people's understanding (of the market)," he told the forum. But Liu He, vice head of the Central Leading Group for Financial and Economic affairs, said Beijing's pump-priming was needed to cushion the economy from the global downturn.
"When the world economy was in free fall, the central government had no choice but to intervene directly, which was a big success but have also led to some problems," he said. China's economy would steadily move towards more modest expansion, but it would be more balanced and sustainable as consumption plays a bigger role in driving growth, Liu said.
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