Reducing overcapacity must be a priority, economists say
Print Edition
CHINA should prioritize eliminating overcapacity and drive market-oriented reforms to unleash its growth potential, experts said yesterday.
The country’s overcapacity was about a third of its total production last year, higher than the global average of about 20 percent, said Liu Haiying, chief economist at Guofu Investment Management.
The ratio has risen 10 percentage points over the past three years, and contributed to the jump in non-government debt-to-GDP ratio from 110 percent in 2012 to nearly 200 percent last year, he said at the Shanghai Investing Summit, organized by the University of Virginia Darden School of Business and Pudong Institute of Finance.
Overcapacity could hurt investment returns, trigger capital outflows and block growth potential in the world’s second-largest economy. Cutting overcapacity should be a priority for the government along with reforms to boost the role of the market and cut state intervention, he said.
The government may cut stimulus measures to strive for balance between growth and quality, he said.
Yin Lei, chief executive of Chongyang International Asset Management Co, said the government could continue expanding investment options for private capital and support advanced manufacturing activities to help cut overcapacity.
It could also help diversify investment if individual investors cut their bank deposits and increase investment in wealth-management products, he said.
The government should also enhance protection of intellectual property rights to encourage innovation, he said.
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