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WASHINGTON - China's fast economic growth is a boon to the rest of the world, but the country needs to master several challenges in adjusting its economic growth model by reducing reliance on exports and boosting domestic consumption, a US economist said.
In an increasingly intertwined world, other nations should cooperate with a fast-growing China through multilateral mechanisms, Arvind Subramanian, a senior fellow at the Washington-based Peterson Institute for International Economics, told Xinhua in a telephone interview.
If China maintains its fast economic growth, it is "unambiguously good news" for the world, he added.
"If China grows, the rest of the world benefits," as China will increase its demand for exports from other nations, the renowned expert said.
Domestically, more and more Chinese will be lifted out of poverty and enjoy better lives as the economy continues to expand, Subramanian said.
As China is trying to transform its economic growth model, many industries have to adjust to changing economic and financial landscapes, he said.
He also offered some suggestions on how to improve the quality of China's growth. For example, the expert said many price distortions need to be minimized, and that cheap loans have contributed to over-investment, which has environmental consequences. Furthermore, the price of energy needs to be adjusted, which would also help solve environmental problems, he said.
Moreover, China needs to further open up its financial sector, while state-owned enterprises have to adjust in the process as they might lose easy excess to credit, Subramanian said. China's export sector also needs to adjust because the nation is shifting its focus from manufacturing to services, he believed.
Subramanian pointed out that any change in growth strategy comes at a price, adding that "the reason to do it is that if you persist in the current strategy, in the future there will be much greater costs. That's the reason for adjusting earlier."
"As long as the economy is growing rapidly, you have the resources to make these adjustments," he said, adding that it is also important to strengthen the social safety net in good times when growth is robust.
There are many opportunities in China's service sector as China is improving its social safety net and health care system, Subramanian said.
In his new book "Eclipse: Living in the Shadow of China's Economic Dominance," the expert said "adjustments to these prices will no doubt test the Chinese economic system."
China should try to solve its domestic challenges while at the same time assuming more global leadership, as China has a comprehensive impact on the global economy, Subramanian said.
"Anything China does affects the rest of the world, and anything the world does at a systemic level affects China," he said.
"In the economic realm, we must empower China, because that's the way to ensure China becomes part of the global system," Subramanian said.
To empower China means giving China a greater voice in key global organizations including the International Monetary Fund (IMF) and the World Bank, and to facilitate the rise of the Chinese currency, the former assistant director of IMF's Research Department said.
Despite being stunned by China's development on the geopolitical front, Western powers should solve economic disputes through multilateral mechanisms in a way to compromise with China and minimize potential friction, rather than resort to unilateral operations, which the US Congress often takes, he added.
The world should rely more on multilateral rules, multilateral institutions including the IMF, World Bank and World Trade Organization (WTO), and multilateral negotiation procedures to cooperate with an ascendant China, the expert suggested.
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