China will keep its fast economic growth in a more balanced way this year thanks to policy adjustments, a top Chinese banking executive said on Wednesday.
"I think China is doing very well ... and I would see China will even have a better year this year," Min Zhu, group executive vice president of the Bank of China, told a seminar on the world economic prospects at the World Economic Forum Annual Meeting held in Davos, Switzerland.
China, one of the main drivers for the world economy, kept its fast expansion in 2006. Zhu predicted that the Chinese GDP growth rate last year would remain at the high level of 10.5 percent, over two times more than the world's average, which was estimated at 3.9 percent by the World Bank.
At the same time, Chinese consumer price inflation stood at only 1.3 percent last year, and producer-price inflation at only 1.9 percent.
The faster-than-expected growth was achieved with prices under control and profit earnings on increase, which means China is improving efficiency, Zhu said.
Although there are widespread concerns about the threat of overheating economy, Zhu said the Chinese government has implemented serious policy adjustments since the second half of last year. With those measures in place, China is going to re- balance the economy by slowing down export-led growth and cooling down over-investment.
"We see all these things in place now. This year we will have an also strong growth, but much more balanced," Zhu said.
Despite robust growth, China is facing pressure for its climbing foreign reserves. Zhu said the foreign reserves are likely to continue growing in 2007, which passed US$1 trillion for the first time in 2006.
Although some Chinese people seem excited about the money, Zhu said he himself sees it as an increasing liability rather than free money.
The US government has been pressing China to accelerate appreciation of Chinese currency RMB as a way to solve its own deficit problem.
Zhu said China would likely move slowly with any upward revaluation of RMB, but also noted that no US policy action has been taken to boost savings, widely considered as part of the problem driving the US trade deficit.
"It's much easier for China to make its exchange rate more flexible than for the US to raise its savings..." Zhu said. "The ball is not in China's court. It's in the middle of everybody's court."
(Xinhua News Agency January 25, 2007)