Economic slowdown brings opportunities, not fears

The Chinese central bank has cut interest rates and reserve ratio requirements to stabilize the economy.

"China has ample capacity to avoid a hard landing," Lael Brainard, the US Treasury's under secretary for international affairs, said at a Washington-based think tank on Wednesday.

"Chinese authorities have been very pragmatic ... We've seen some indications they are going to be much more focused on lifting domestic consumers," a key part of the re-balancing efforts to make the growth more sustainable, she noted.

Former US Treasury Secretary Henry Paulson also dismissed the suspicions of China falling into a downward spiral.

"There is no doubt that the economy has slowed down significantly," Paulson said Tuesday in an address at the Atlantic Council, a think tank in Washington. "My own best judgment is that we're not going to see a hard landing," he said.

"I would be quite surprised" if China's economy does not grow somewhere between 7.5 percent and 8 percent this year, he added.

China has embarked on a process of steering its economy on a more sustainable path, away from exports and investment, to a greater reliance on domestic consumption.

Pettis said the combination of China's re-balancing and lower commodity prices bodes well both for China and the world at large.

Hopeful but bumpy road ahead

In its latest report, the IMF warned that the global economy, which was not strong to start with, has shown signs of further weakness. It urged the emerging countries to get ready to cope with trade declines and the high volatility of capital flows.

Although China has vast resources to stay on track, many economists worried that the road ahead could be bumpy, especially as global economic picture darkens.

Pettis noted that the key reform, and probably the most difficult to implement, is to let real interest rates rise. This will give a boost to the income of ordinary households, who save a great deal of their money in the form of bank deposits.

"The leadership should consider moving more aggressively on a variety of structural reforms that would have an expansionary impact on the economy," said Huang.

"Although there is still considerable uncertainty about when China's downturn will bottom out, most indicators suggest that this is likely over the coming months," Huang added.