China raises its voice in the world
Q: What is your point of view on the opportunities that this crisis presents to China?
Zhang: In my opinion, firstly, China has raised its voice in the world. In the modern history of China, it has never been like this before, while today western countries realize that China plays a significant role not only on the international political stage, but also on the international economic stage. Western countries hope for China’s participation in all activities, including stabilizing the financial situation, pushing forward the implementation of economic stimulus plans as well as keeping the international monetary system stable. As the US and the EU are trying hard to urge China to play a role, it is a good opportunity for China to further its right to be aware of, participate in and speak on international financial rules, and nurture an external environment favorable to the steady opening-up of China’s financial system. It is also a good time to advance the renminbi in becoming a regional and international currency.
Aside from an increasing vocal voice, the crisis has also provided the opportunity for China to further its national interests. China’s stable fiscal and financial systems, huge foreign exchange reserves, on-going industrialization and urbanization process, and ever-present labor cost advantages all contribute to its relatively favorable conditions. Therefore, China is definitely in a position to take this opportunity of adjustment to strive for its interests as much as possible. For instance, as international primary commodity prices drop, China can establish strategic reserves of resources and energy, making greater use of overseas resources. China can also accelerate establishing a strategic reserve of human resources and technologies during this world-wide depression of labor markets. The large decline in offshore asset prices, another issue that attracts heated discussions, presents opportunities to carry forth activities such as overseas mergers and acquisitions.
What opportunities does the financial crisis bring to China?
Crisis likely to present opportunities for corporate restructuring
Q: In the past, one of the important engines for China’s economic growth has been exports. The international financial crisis has resulted in a global economic recession, which has had huge negative impacts on the large production capacity China generates to meet the demands of its overseas markets. With these impacts, how can China seek new opportunities?
Zhang: The international financial crisis highlights a serious problem in China’s economy —surplus production capacity. As a matter of fact, in a destructive manner, the financial crisis is forcing the world to adjust its unbalanced growth patterns, which is sure to greatly weaken the debt-supported purchasing power of the US and other countries. In the medium and long run, this will make the surplus production capacity problem and the deflationary pressure more severe than expected. However, China should also realize that the crisis has caused a sharp reduction in the demands of its overseas markets, forcing China to change its growth pattern, which relies heavily on exports, to actively develop the domestic consumer market and nurture the domestic market. In addition, it also forces China to change its previous pattern of low-cost competition and enhance the competitiveness of Chinese industries and enterprises through independent innovation. In this sense, the crisis is conducive to the acceleration of China’s economic restructuring.
Crisis to provide motivation for a new round of reforms
Q: In your opinion, what impacts will this economic crisis have on China’s reform and opening-up?
Zhang: I think this crisis will provide China the motivation for a new round of reforms. For example, economic restructuring requires China to accelerate reform on energy resource pricing. The improvement of domestic demand requires more relaxed restrictions for the access to basic industries and the service industry in order to encourage competition and the reduction and break-up of monopolies. The promotion of employment opportunities requires active development of the service industry and small and medium-size enterprises, which are facing a bottleneck problem in fundraising that can only be resolved after the current financial system and existing financial supervision models are reformed.
The international financial crisis brings China a future of opportunities and challenges, of hope and pain. As long as policy readjustment is prompt and effective, and China can make good use of the opportunities of the global economic downturn over the next few years, it is still possible for China to maintain a stable and relatively fast growth, establishing its position in the international community.
By People’s Daily Online