Monday of the ADB annual conference opened early with the country presentation for China, which addressed the recent macro-economic situation, looking at the main issues and challenges, and offering a glimpse of what might be expected in the future. Li Yong, China’s vice minister of finance gave a run through of China’s recent phenomenal development achievements, highlighting the double-digit growth achieved over the past five consecutive years. This year marks the anniversary of China’s reform and opening up in 1978, so this was an opportune moment to reflect on China’s success, and look carefully towards the future.
Due caution was placed on three important issues:
International uncertainties and potential risks, including the huge uncertainties in capital flow and the price hike in international markets which has led to inflation and US exchange rate uncertainty.
The danger of overheating of the Chinese economy.
The growing danger of rising prices and costs of production.
Li Yong discussed the rise in wages in China, which are now up to three or four times those of some other Asian countries, a phenomenon which has led to cost-push; the moving of assembly lines away from China and towards its neighbors such as Vietnam, Cambodia and India. Mr. Li said that this was not something to worry about, nor something China should seek to prevent. A natural process, China should simply focus on upgrading technology; beginning to design the garments and other commodities rather than simply manufacturing them.
In the questions and answers session, Li Yong dismissed economists’ suggestions of the likelihood of a recession in China over the next couple of years alluding to a Chinese proverb: “Governing a great nation is like cooking a small fish: too much handling will spoil it.”
