Cities called key to growth

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　　At the China Development Forum³ 2012, economists⁴ said that China urgently needs to step up its economic restructuring, noting that urbanization and further reform of the nation's distribution system will speed up the process.

　　A slew⁵ of new central cities will gradually emerge in China's western areas, unleashing⁶ enormous potential for investment and consumption, Liu said.

　　The number of China's city dwellers⁷ surpassed its rural population for the first time in 2011. The urbanization rate is likely to increase from just above 50 to around 60 percent by 2020 and 65 percent by 2030, according to a study by the center.

　　Ma Jiantang, head of the National Bureau of Statistics, said the country's urbanization rate has much room to grow, especially in western areas. The average urban share in developed countries is 66 percent.

　　Driven by more cities and industrialization, the growth of the world's second-largest economy will continue but probably not as rapidly as in previous years, Ma said.

　　Residents moving from rural to urban areas will see their personal consumption expand by three times, which would bolster⁸ the country's economic growth when investment and exports fall, he said.

　　Ma predicted that China's industrialization process is less than 60 percent complete, citing internal NBS research. He said that is why China's industrial sector⁹ is still growing at a fast rate.

　　However, an aging population and high consumption of energy and environment are posing challenges to a sustainable growth, which urge China to further transform its economic pattern, Ma said.

　　The year 2011 was the first time China had seen its proportion of workers in the overall population shrinking, Ma said, adding that the population will be aging even faster in the future.

　　Stephen Roach, non-executive chairman of Morgan Stanley Asia, said a hard landing will "never happen" in China, however, the country's implementation¹⁰ of the economic transformation¹¹ was too slow.

　　China should make further progress in the context of the 12th Five-Year Plan (2011-15) in sectors¹² such as social security to make consumption a major driver of China's economy, he said.

　　Qian Yingyi, dean of the school of economics and management of Tsinghua University, said in-depth fiscal¹³ reform is crucial.

　　Qian was approved last week by the State Council as an academic adviser¹⁴ to the monetary¹⁵ policy committee of the People's Bank of China, together with two other economists, Chen Yulu and Song Guoqing.

　　Earlier this week the National People's Congress adopted the budget plan for 2012 with 2,291 votes for it, 438 against and 131 abstentions. The split reflects delegates' concern about the expansionary fiscal policy, he said.

　　China's fiscal income increased dramatically from 1.3 trillion yuan ($0.2 trillion) in 2000 to 10.3 trillion yuan in 2011, said Qian. However, "the distribution among government, business and consumers has not been adjusted but further distorted".

　　The imbalance can also be attributed to the high savings¹⁶ and investment of the government and State-owned companies, he said.

　　Future fiscal regulation "should pay more attention to the underlying¹⁷ problems and systematic¹⁸ adjustment", Qian said.

　　Li Daokui, professor at Tsinghua University and a former central bank adviser, also put reform at the top of this year's economic agenda.

　　Li said settling the fiscal balance sheet would be a major task for the government, which would allow a steady and continuous fiscal stimulus¹⁹, he said.

　　"China's macro policies have a long-term goal rather than just curbing²⁰ inflation and restoring growth," Li said. For instance, a "prudent²¹" monetary policy is more about economic transformation than curbing prices.

　　"If we continue striving to maintain a high growth rate in the short term as advised by Western countries, we'll definitely see our contribution to the world economy subside²² in the long term," Li said.

　　As for the financial industry, he suggested banks "have conditions" to liberalize the interest rate and securitize assets. Considering banks' high profits in 2011, he said they should increase their capital adequacy ratio and better serve the real economy.

　　Wu Jinglian, senior research fellow of the Development Research Center of the State Council, said China must lay out a "top-level design".

　　"The path China chose 30 years ago was correct and should be adhered to," Wu said.

　　Economic structural²³ transformation does not mean the whole country should switch to high technology and give up manufacturing. "The most essential thing is to increase added value of these enterprises and improve workers' knowledge and skills, which will increase their income and the country's consumption as a whole in the long run," he said.

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