China's economic reform heading to right direction: US expert

NEW YORK -- Ethan Harris, co-head of Global Economics Research at Bank of America Merrill Lynch, on Tuesday expressed optimism on the ongoing economic reforms in China, saying it's only a matter of time before the economic growth picks up again in China.

"China is dealing with the bad loan problems and poor allocation of capital, bringing more efficient markets into play, and they are also trying to deal with the corruption issues," Harris told Xinhua in an exclusive interview after the BofA Merrill Lynch 2015 mid-year press conference.

"All these things attempt to heal some underlying problems in the economy, which are very important," he said.

In his view, China is now at a more mature stage of development, which needs overall reforms to sustain its original strong-growth model.

"When you are in an early stage, you quickly adapt to the new technology and have high saving rates. Investment doesn't have to be that efficient to create high growth," Harris explained.

When entering a more developed phase, he noted, Chinese economy needs more effective investment. "You need to have a better allocation of capital, a better rule of law, and let the market come in more and dictate where capital flows."

He praised China's gradual opening up of external accounts in the capital market, saying it'll create an opportunity for Chinese companies to improve their governance and accounting, which is part of the general process to modernize the financial sector.

Talking about the recent slowdown of Chinese economic growth, Harris remains positive. "Chinese economy will pick up in the second half of the year as the government continues to apply stimulus," he predicted.