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Chinese economy set to grow in next 20 years: World Bank
May-17-2010

Highly effective investment in infrastructure by the Chinese government and the urbanization process in China will ensure a continuous rapid growth of the Chinese economy in the next 20 years, said a senior World Bank economist on Saturday.

During the Southeast Asian financial crisis in 1997-98, the Chinese government solved the economic development bottleneck by investing in infrastructure, said Justin Yifu Lin, chief economist and senior vice president of the World Bank. It laid a solid foundation for the development of an export-oriented Chinese economy, he pointed out.

"Since the financial crisis in the second half of 2008, the Chinese government implemented a dynamic financial policy and heavily invested in infrastructure. It propelled China's economic growth and contributed to the global economic growth as well," Lin said during the China and the Future of the Global Economy conference at the University of Chicago.

Most developing countries face backward infrastructure. The World Bank may consider giving more loans to developing countries to help them invest in infrastructure, Lin said.

He 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 the Chinese economy," he said.

On negative factors, such as high real estate prices, affecting the Chinese economy, Lin noted that government measures over the last few weeks "will be able to guarantee the smooth development of the economy."

He also said a growing income gap would hurt China's economic growth.

"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 in lending to large enterprises while a large number of small and medium companies and people in rural areas are not able to access much-needed financial services. Lin believes that this restricts the development of the rural areas as well as small and medium companies, resulting in a wider income gap.

Lin said the yuan's revaluation will not solve unemployment in the United States because products exported from China are mainly labor-intensive which are no longer made in the US.