Chinese, American economists wrap up dialogue aware of challenges and opportunities
American economist Laura D'Andrea Tyson, an economic advisor during the Clinton Administration and former director of the United States' National Economic Council, described Monday's closed-door meetings as a "very frank exchange of ideas."
She addressed the near-term growth challenges facing the economies of China and the United States, as well as the world at large. She also spoke about long-term issues and global cooperation mechanisms that may be used to help the global economy rebalance itself in the long run.
"The global economy is in a very fragile set of circumstances right now," she said, citing a slowdown in global economic recovery as well as Europe's unresolved financial crises.
Although China's economic growth is returning to a more moderate pace, Tyson said the group agreed that it is still "quite high." China's robust economic growth, combined with moderate year-on-year inflation, will result in a soft landing for China, according to Tyson.
China's real estate bubble, or, as Tyson said, "the allegation that there is a real estate bubble in China," was also discussed.
"As the economy develops and urbanization takes hold, there are substantial reasons why housing demand in China is rising rapidly," she said.
The demand for housing in China is the result of growing per capita income and a "changing balance of demand and supply, not a debt-fueled asset bubble as was the case in the United States," Tyson said.
American economist Michael Spence, recipient of the 2001 Nobel Memorial Prize in Economic Sciences, addressed a fundamental difference between the ways in which China and the United States are able to approach economic issues at both individual and global levels.
"China has a Five-Year Plan. It's easy to read, it's understandable," Spence said of China's 12th Five-Year Plan (2011-2015). "It forms the basis for both debate, on the one hand, and for focusing people's attention on what needs to happen in order to transform the structure of the economy."
"The United States does not have a Five-Year Plan, nor does it have anything like the Five-Year Plan. We do not have a shared vision," he said.
This difference, he said, creates a "very large asymmetry" between the two countries.
Despite divergences in macroeconomic planning, policies and strategies, both countries agree they will need to cooperate in both the short- and long-term global economic recovery processes.
In light of the failures of current and past growth models, Spence urged the implementation of a new growth model that will allow Asia to lead economic growth for the next three decades.
"The chances that growth can be accomplished on the old growth model are about as close to zero as one can get," Spence said. "We're going to have to change our lifestyles. Everybody understands what that means here, but nobody has a clue what it means on the other side of the Pacific because we don't use those words."
"Lifestyles for us are sort of what color socks you wear," he said. "Frivolous or individual choices."
Spence said he believes the focus should turn to more efficient uses of natural resources.
"The leadership in this is going to come from China," he said. "That's basically why you see in the 12th Five-Year Plan a kind of serious start at inventing this altered growth pattern."
China is taking lessons from countries currently embroiled in the global financial crisis, according to Fan Gang, a reform advocate and an economics professor at Peking University HSBC Business School.
"China is in the early stages of building a social safety net," he said, citing job creation and the recent creation of social security fund provisions.
"We must learn from developed countries to prevent ourselves from repeating the same mistakes," Fan said.
Both Chinese and American economists called for enhancing two-way trade as a means of economic rebalancing, as well as opening up funding channels for small- and medium-sized firms from both countries.
"Some institutions hamper or impede the outflow of Chinese investment," said He Liping, an economics professor at Beijing Normal University.
"We need effective reforms in our capital control policy, and we must build a free-trading foreign investment market so more Chinese businesses can invest abroad," He said.
Tyson shares these sentiments, urging the development of channels for small- and medium-sized enterprises in the United States wanting to invest in China or enter markets aimed at China's growing middle class.
As consumption grows in China and wanes in the United States, "the issue really on the U.S. side should be selling more to China," but not that China should be reducing its exports to the United States, Tyson said.
Spence ended on an optimistic note for the United States, saying that the crisis is not in the country.
"We have a challenge," he said of the U.S. "The crisis is in Europe."
Meanwhile, Wu Xiaoling, the dialogue's moderator and former deputy head of China's central bank, the People's Bank of China, said the forum inspired confidence.
"We should have confidence that these solutions will come as leaders around the world work together, but this will take time," Wu said, adding "so we should be patient."
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