CHICAGO - Highly effective investment in infrastructure by the Chinese government and the urbanization process in China will ensure the continuous rapid growth of the Chinese economy in the next 20 years, said a distinguished economist on Saturday.
Justin Yifu Lin, chief economist and senior vice president of the World Bank, made the statement during the "China and the Future of the Global Economy" conference held at the University of Chicago.
Lin was very positive about the Chinese government's efficiency in infrastructure investment.
During the Southeast Asian financial crisis last century, the Chinese government solved the economic development bottleneck by investing in infrastructure. It laid a solid foundation for the development of an export-oriented Chinese economy, he said.
"Since the financial crisis in the second half of 2008, the Chinese government implemented a dynamic financial policy and heavily invested in infrastructure. It successfully drove China's economic growth and contributed to the global economic growth as well."
Most developing countries are facing the economic bottleneck of a backward infrastructure. The Chinese government has set a good example for other developing countries with its highly efficient investment in infrastructure. The World Bank may consider providing more loans to developing countries to help them invest in infrastructure, he continued.
Lin said China's future economic development has greater potential compared with other major economies.
"Currently, China is a nation with medium income, with only a 40-percent urbanization rate. With faster development of China's urbanization, the demand for infrastructure investment will increase which will ensure a long term growth of Chinese economy."
Regarding the negative factors that affect the Chinese economy such as high real estate prices, Lin noted, "The regulative measures taken by Chinese government over the last few weeks will be able to guarantee the smooth development of Chinese economy."
Another restrictive factor to affect China's economic growth is the growing income gap, Lin pointed out.
"The growing income gap in China will be a problem for the stable and long-term economic development. We can try to reform the financial system to reduce the income gap in China," he said.
He thinks that the current financial system in China is too concentrated. Chinese financial institutions are only interested in loaning to large enterprises, while a large number of small and medium companies and people in rural areas can not get needed financial services.
Lin believes that to a certain degree, this restricts the development of rural areas as well as small and medium companies, and enlarges the income gap. Therefore, the financial system in China needs urgent reform.
Talking about the exchange rate issue regarding the Chinese yuan, Lin said the revaluation of the yuan will not be able to solve the US unemployment because the products exported from China are mainly labor-intensive products which are no longer manufactured in the United States. It can only increase the Americans' cost of living.
Xie Yunliang, acting consul general of China in Chicago, delivered a welcome speech at the conference. Over 600 people from China and US financial and research institutions attended Saturday's conference.
