China can help global payment imbalances by addressing domestic challenges: ADB Vice President

Lawrence Greenwood, Vice-President of the Asian Development Bank (ADB), said in Beijing that China can help redress global payment imbalances by addressing its domestic challenges.

Greenwood told the Caijing Magazine Annual Conference held in Beijing on Monday that the domestic challenges China is facing cover social development, income disparities between rural and urban areas and environmental degradation.

He said by increasing spending on health and education as well as social security and safety net systems, the Government can encourage households to save less and consume more.

The Government can also discourage excessive retention of earnings by state-owned companies by encouraging them to pay dividends to the state, he stressed in his speech.

Greenwood also noted that the Chinese government has sufficient tax revenues to increase social expenditure.

He recommended less investment in the production of goods and more quality investment in human capital, particularly rural development, health and education, social security, environmental improvement and poverty reduction.

He said that increased government spending of 100 billion yuan (12.8 billion U.S. dollars) a year could lead to a significant reduction in poverty and quicker development of rural areas of China.

He also stressed that deepening capital markets, opening markets for goods and services, and moving towards a more flexible foreign exchange rate will also help China address its external imbalances.

He added that China is on the right track, has identified the imbalances it needs to address, and is developing and implementing detailed action plans to achieve more balanced growth.

"ADB is pleased to be working closely with the Chinese government in that effort and to be investing heavily in rural development, environmental protection, clean energy, water and waste water treatment." Greenwood said.

Source: Xinhua