China's economic reforms, regional initiatives bring global benefits

"Internal infrastructure investment has been useful to maintain demand and employment in the short run, but it does little to address the domestic demand deficiency which one can see in the continuing very high national (not merely household) savings rates," he explained.

Chinese efforts to finance global public investment are laudable, but the size of this investment would be much smaller than domestic investment because other countries have an absorption problem for foreign capital, Gros said.

Noting that these initiatives will help push growth, Erixon said that "new investments that are combined with economic reforms have a much better multiplying effect."

Regarding China's trade policies, the ECIPE chief said China's efforts to spur regional trade integration are important.

China's trade negotiations with the United States or the European Union should not be that far off, provided that domestic economic reforms are sped up, he added.

Chinese capital going overseas

Asked to comment on the going-out of Chinese capital, Erixon said the global market has seen an increasing competitve presence of Chinese companies.

Some sectors are sensitive in some countries, especially the infrastructure sector and those previously privatized sectors, but countries with a protectionist sentiment towards Chinese are declining in number, he said.

China can contribute to better conditions for cross-border investment by allowing more competition between outward oriented Chinese investors and by reforming corporate governance that will make it easier for others to understand how companies in China work, according to Erixon.

Innovation

Both economists also offered their insights on how China can step up its innovation-led growth, as Chinese governments are pushing for more innovation-supporting measures, including encouraging people to start undertakings and promoting the development of the internet economy.

Erixon said apart from increasing the scope for competition in the economy, China could accelerate its own innovation-led growth by education.

"The experience of many other countries is that it is smarter to invest in readiness to adopt innovations than invest in the capacity to create them," he added.

Innovation is best left to the private sector, Gros said, noting that in reality, the government is rarely the source of innovation.

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