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Experts: China's six major economic imbalances still exist |
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16:41, August 02, 2007 |
China has economic imbalances, some of which are the result of insufficient reform, said Lin Yifu, director of China Center for Economic Research of Peking University at the 10th report meeting on China's economic observation on Sunday.
Insufficient reform led to six economic imbalances
"Insufficient reform has widened the gap between urban and rural areas as well as the gap of income distribution in these regions. It also indirectly led to excessive investment, insufficient consumption, trade surplus and over-quick accumulation of foreign exchange reserves," Lin said. "These old problems, first occurred in 2003, still exist today."
These specific problems are: the income gap between urban and rural areas reached 3.3:1 in 2006; while the world average level is only 1.8:1. In the absence of fundamental changes in urban and rural income growth, the gap between China's urban and rural areas will reach 4.1:1 in 10 years. In addition, the Gini coefficient exceeded 0.45 with the income gap widening.
Moreover, the overheated investment and relatively insufficient consumption made it difficult to eliminate the excessive production capacity first occurred since 1997. The proportion of final consumption in expenditure has fallen from 61.4% annually in 2001 to 50.0% in 2006. For years, investment regularly concentrated in a few industries over a certain period of time, for example investment focused in chemical industry in 2006.
China witnessed "double surplus" in both its capital account and current account. Trade surplus of the first half of the year reached $112.53 billion, far exceeding the $61.45 billion of the same period last year. To the end of June this year, China's foreign exchange reserves hit a record high of $1.3326 trillion. This has directly contributed to a rise in asset prices.
The last problem is the tremendous pressure on resources and environment. In 2006 China's GDP accounted for 5.5% of the world's total, but the energy consumption accounted for 15%.
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