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May 23, 2011

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Home » Business » Economy

Investment change to help China

KLAUS Schwab, founder and executive chairman of the World Economic Forum, has expressed his confidence in China's continuing economic growth while disputing bearish comments on the country.

In an exclusive interview with Xinhua, Schwab said he did not agree with United States economist Nouriel Roubini with his prediction that China would suffer an economic slowdown after 2013.

Roubini, also known as "Dr Doom," wrote in an article: "Once increasing fixed investment becomes impossible - most likely after 2013 - China is poised for a sharp slowdown."

Roubini's prediction is seen as a growing concern that growth of the world's second largest economy, which heavily relies on investment, could not be sustained.

To counter the adverse impacts of the global financial crisis, China announced a stimulus package of 4 trillion yuan (US$615.38 billion) to be spent by the end of 2010.

The concern is "once this special boost to the economy comes to an end, the economy could take great damage," Schwab said.

However, he said he was confident that China, in time, would be able to "re-channel the investments and energy, which are now put into physical infrastructure, to develop much more non-physical infrastructure such as education, research, high technologies and green economies."

By switching from a hard infrastructure to a green infrastructure, and increasing investment in green technologies, China could avoid the pitfalls that Roubini had foreseen, he said.

According to Schwab, the future challenge for China is to secure a much more balanced situation inside its national economy, which he believed is composed of two parts - one well-off and the other comparatively underdeveloped.

"It's not only balancing out the more rich provinces and the more poor provinces, but also balancing out consumption, investment, export-led industries as well as the economy, ecology and environment."

As China's traditional advantage of low labor costs seems to be diminishing, it has to "move up the ladder of industrial production and become a country which builds its future on high technology," Schwab said.





 

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