China's export-and-investment led growth model, which has been proved very successful previously, should shift to reliance on domestic demand to facilitate a sustainable economic growth, an official of manila-based Asian Development Bank (ADB) has said.
Robert Wihtol, director general for ADB's East Asia Department, said in a recent exclusive interview with Xinhua that this shift has two great advantages.
Firstly, it will create more jobs. The export and investment driven model is capital intensive, while the service driven model is based on consumer demand, so it will create more jobs.
Furthermore, this is particularly important in the current global situation. It will create a buffer against external shocks, added Wihtol, who used to be the ADB chief representative for China.
Wihtol also warned China about the situation of "middle-income trap", where manufacturers of a country often find themselves unable to compete in export markets with lower-cost producers elsewhere.
As China has had more than 30 years of successful growth, it is reaching the limits of old growth models. So China is beginning to face the question of "income trap", which is also faced by many middle income countries, he said.
As a country's economy grows, then salaries and wages go up, and it would be harder to compete in the global market, he explained.
"What we need to do for this is to invest a lot in education and innovation," he said. China's economy has to look for more knowledge-based production. It has to look for more value addition in its production. In this way, it can keep its economy continue to be competitive, he added.
When talking about ADB's cooperation with China, Wihtol said, " Over the past 26 years, we have been working closely with the Chinese government in the areas of urban environment development in such areas as clear water and waste water treatment, solid waste management, and we also worked a lot on improvement of energy efficiency, clean energy uses like solar power, wind power and also clean coal technology. Clean coal technology is very important for the country like China because which uses a lot of coal."
He admitted that China's energy use is still inefficient. " About 60 percent of China's commercial energy use is for industry, while in the developed economies, the figure is about 20 percent to 30 percent," he said
"We would like to see that China invests more in high technology and clean technology, retrofit existing factories, so they would be much cleaner," he said. This is one of the most important thing China could do its role environmentally. The second thing China could do is to clean up environmental profile of its cities through heating, transport and lighting, when 50 percent of people have already lived in cities of China, he added.
As for poverty alleviation in China, he said, "It is very important to recognize the enormous role of Chinese government played in eliminating poverty and increasing people's livelihood. Since China opened up its economy to the world a little more than 30 years ago, the country has made enormous progress in poverty alleviation. The government has lifted more than 500 million people out of poverty, which is enormous and hugely commendable achievement."
The ADB has been cooperating with the Chinese government in a small way to contribute to this enormous process, mainly cooperating in areas of transport infrastructure, clean energy and environmental clear up in cities and natural resources management, he added.