Focus on China's role in global economy

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A1 China has made significant progress, but still has a challenging reform program ahead. Like other leading economies, it needs to expand the space in the economy for competition, innovation and entrepreneurship. It is investing a lot of resources in order to raise productivity, but such investments are increasingly hindered by the way markets work and are regulated. The transition from industrial production to services would be helped by reforms that would open up the services sector for more competition. Finally, the financial sector needs to be subject to new and better rules－preferably anchored in a new macro framework－that help to stabilize the financial sector and deter misallocation of resources into real estate and other sectors.

A2 China's role for global growth will remain strong, even if it will moderate a bit as some other large economies notch up their growth. The most important thing about China for the world economy is that its growth is sustained over a long period of time, and restructuring the economy will support that.

China's rates of economic growth have already come down substantially from the levels it had some years ago, and that decline affected, of course, the world economy. But it was possible for other countries to adjust, and that should work in the future as well, even if it means that some countries with strong exports to China will see growth declining further. Generally, every economy in the world will have to adjust to the decline of the global growth model of the past 30 years－driven predominantly by global trade and investment－and move into a new model based more on innovation.

A3 China is in a structural growth slowdown and I expect that, even if it has stabilized in recent years, there is risk that it will decline further as China is confronted with strong economic headwinds, both domestically and from abroad. China has set out the right type of reform track in its past five-year plans, and they take aim at reforms that will help to propel more competition, a greater role for the private sector and an expansion of the services sector.

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