China's slower but better growth benefits world economy in long run


China's announcement on Monday of lowering its GDP growth target to 7.5 percent this year has been met with mixed feelings around the world.

Some investors in the oil, copper and equities markets seem concerned, while most analysts said it would create space for China's structural reforms and put the economy on a sustainable track.

"It's understandable that some are concerned about slower growth in China, as the country's contribution to world economic growth has reached about 30 percent," said Zhang Liqun, a research fellow with the Development Research Center of the State Council, China's cabinet.

However, Zhang told Xinhua, the adjustment of the growth target is aimed at sustainable development, which would bring greater business opportunities in a broader sense.

China set its growth rate for the year at 7.5 percent, the slowest pace of expansion since 1990. This is also the first time for the government to lower its growth target after keeping it around 8 percent for seven consecutive years.

By setting a slightly lower growth rate, China hopes to achieve "higher-level, higher-quality development over a longer period of time," Premier Wen Jiabao said at the opening of the annual parliamentary session Monday.

Zhang said the move was taken in face of global turbulence and a pressing domestic demand for economic restructuring, noting that the world economy also needs re-balancing.

"Only through major re-balancing can the world witness a new round of growth and prosperity," he said.

Zhuang Jian, a senior economist with Asian Development Bank, predicts that, based on experiences from previous years, the actual growth rate of China's GDP this year could be higher than the figure projected.

Even the 7.5 percent growth target is still high compared with other countries, given that the major economic engines in the world, including the United States, the European Union and Japan, are either not functioning properly or recovering slowly, Zhuang said.

The Asian economic powerhouse, which has been striving to shift away from dependence on exports, has put more emphasis on domestic consumption as its engine of growth this year.

"The expansion of domestic consumption could mean more imports of consumer products, especially of the high-end category, benefiting the world," Zhang Liqun said.

The changes of the consumption pattern will also lead to higher investment in urban infrastructure, such as subways, underground passages and drainage equipment, which he said would bring more business opportunities for resources-rich countries.

He also said industrial optimization in China would provide a growing market for advanced technologies and equipment as the economy shifts to depend more on technological progress.

To boost consumption, Wen said China would spend more on education, expand medical insurance and pension coverage, and advance the reform of the fiscal and taxation systems, social programs and income distribution.

"It would be very likely that China would further raise the threshold for individual income tax and cut added-value tax for medium and small-sized enterprises," Zhuang Jian said.

Zhuang said China has been raising citizens' individual incomes in the past years, but it needs to go further, and that employees should have more say in wage negotiations.

"One good sign is that the growth rate of rural residents' income has surpassed that of urban residents," he said. "That will help bridge inequality."

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