Top China Academic: China GDP Growth Slowing On Labor Changes

     BEIJING (MNI) - With China's economic growth in the long term expected to

slow, future growth will rely on the implementation of reforms and the

transformation of its labor force, Cai Fang, vice president of the Chinese

Academy of Social Sciences, said Thursday at an economic forum that gathered top

Chinese economists and financial regulators.

     "Some people hope our economic growth rate could have a 'V' shape rebound,

and return to the previous growth pace," of 8% or 9%," Cai said. "I think that's

an illusion."

     Cai said China is currently in a "Lewis turning point," which refers to the

period when the labor force transfer from the countryside to cities has bottomed

out and an overall labor force shortage comes into being, leading to an upturn

in urban wages.

     The benefits brought by the scale of the workforce population in previous

decades are rapidly disappearing, Cai said, which can be seen in higher labor

costs, the reduction in capital return rates and productivity slowdowns. "This

does not mean that we are doing worse than before, but we enter the next new

development phase," Cai said. "They add difficulties [to China's economic

growth], and a slowdown is inevitable."

     "The labor force shortage is the main factor behind the slowdown of

economic growth," as are higher labor costs, Cai said.

     China's economic growth pattern will be a downward curve with several "L"

shapes, although that depends on whether the government efficiently manages the

overall economy, Cai said, adding that macroeconomic policies need to be more

prudent and effective for this to occur.

     "The more concerned you are with the slowdown of the growth pace, and to

use inappropriate policies such as strong stimulation, will instead produce bad

results," Cai said. "Thus, the only way is to reform."

     In a separate discussion at the same forum held by NetEase Finance, a

financial news provider, Liu Shijin, former deputy head of the State Council's

Development Research Center, said China's economic growth would be an "L" shape,

with small "W" shapes occurring within the overall "L."

     China will not return to the double-digit, high-paced growth it experienced

in the past, Liu said, adding that growth will not rise too quickly or drop too

rapidly. "China is now on a new platform where the growth is medium-paced and

stable, but not in a 'new cycle,'" Liu said, rebutting the recent discussion

among Chinese economists on whether a so-called new cycle --  a period where the

economic growth pace is increasing -- has arrived.

     Liu said China is currently in  a "rebalancing" phase, where economic

growth is expected to be basically stable before dropping to some degree and

returning to a slower growth rate. 

     "This platform would last for a decade or so, based on international

experiences," Liu noted.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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