China's economy on right path, US expert says

The recent economic growth target of 7.5 percent and reform policies laid out in China's annual meetings of the National People's Congress and the Chinese People's Political Consultative Conference, also known as the two sessions, are proof that China's "dynamic and flexible" economy is on track, a renowned economist said.

A. Michael Spence, awarded the Nobel Memorial Prize in Economic Sciences in 2001 and who is chairman of the World Bank's Commission on Growth and Development, said the growth target mentioned in Premier Li Keqiang's Government Work Report during the two sessions was a "reasonable" goal.

"This figure seems a very reasonable estimate and goal for growth this year, provided there isn't some major crisis outside — somewhere in the global economy or financial system," Spence said.

Spence, co-author of Medium and Long Term Development and Transformation of the Chinese Economy, has become an expert on the world's No 2 economy in recent years. He and the book's co-author, Edwin Lim, a former World Bank representative in China who set up the bank's Beijing office in 1985, were invited this year by Beijing as economic advisers.

"My impression — as an outsider — is that the changing growth pattern in China is going well and that the present government has an ambitious reform program that will support the structural changes," said Spence. "I think the Chinese economy is very dynamic and flexible."

The annual two sessions are where the Chinese government discusses and sets its agenda for the coming year. The discussions have attracted attention from both home and abroad. This year's key policy objectives include boosting domestic demand, maintaining rural development and enhancing environmental protection.

"These are all major components of the changing growth pattern and reform agenda," said the economist, who teaches at New York University's Stern School of Business.

The government will reform its science and technology management system to encourage businesses to play a more "active" role in technological innovation. The reform agenda includes establishing more science parks in the national innovation demonstration zone, where incentives are provided for creating innovations. The government will also increase spending on cutting-edge technologies.

"Business and government both have important but different roles to play in science and technology management and innovation," said Spence.

"This is already becoming an important element of Chinese growth now and its importance will increase in the future," Spence added.

He believes that reforms set out by the Chinese government under the new leadership will "lessen incentives or opportunities to push investment into low-return territory so that capital will be allocated more by market determined prices, outcomes and innovation."

"China is making these important transitions in a global economy that is still out of balance and struggling with growth," he said.

Though growth may be difficult considering the current global economic environment, Spence is positive about all the efforts coming out of the world's No 2 economy.

"Notwithstanding that, I am optimistic about the growth prospects and the success of the economic, social and environment agendas," he said.