Effective Investment Key to Economic Transformation

　　Participants take part in the discussion "China's Changing Economy" during the 2013 Fortune Global Forum 1 in Chengdu, capital of southwest China's Sichuan Province, June 7, 2013. [Photo: Xinhua/Xue Yubin]
 
　　China's economy is changing. While most participants attending this year's Fortune Global Forum expressed their optimism towards the country's economic transformation 2, they also pointed 3 out the challenges facing China.
 
　　CRI's Xiao Hua has more.
 
　　Dominic Barton, Global Managing Director of McKinsey & Company, expresses his optimism towards the transformation of the Chinese economy, which was a major topic during the Fortune Global Forum held in Chengdu.
 
　　"I am really bullish; I actually do think believe China can do it respecting all big challenges. But the good news is there is an underlying 4 force of growth that is the urbanization. "
 
　　But not everyone in the business world shares Barton's attitude, with some expressing doubts and reservations towards China's economic prospects 5.
 
　　Cai Hongbin, Dean of the Guanghua School of management of Peking University explained foreign attitudes towards China's economy.
 
　　"I think there are two kinds of people holding different opinions about China: those who come to China often are pretty optimistic, and those who never come to China are always predicting that China's economy is collapsing 6."
 
　　Cai is optimistic, as are most of the participants attending this year's Fortune Global Forum discussing China's changing economy.
 
　　Cai states that the transition in China from investment to consumption driven growth is going to be a process, and key to the transformation is efficient investment.
 
　　"The key, I think, for the transformation to be successful is not the matter whether the investment is too much, or the investment is too little. It is really the quality of efficiency of this investment. In other words, it is the efficiency of capital allocation in China, I think that is the key."
 
　　Henry Paulson, the Former US Treasury 7 Secretary is bullish regarding China's economic future, but also points out the issues China will face.
 
　　"China is too reliant on state-led investment and infrastructure 8 and manufacturing, too reliant on exports. There is not enough domestic-led growth. It needs more from the services industry."
 
　　China's growth rate, while still robust 9 by global standards, has slowed dramatically since 2010; it was 7.7% in the first quarter of 2013, down from recent double digits 10. But Paulson has his own take on this.
 
　　"The economy (in China) is getting bigger and bigger. The growth needs to slow. And I think the key thing to focus on is long-term prosperity. And that's we are really talking about what sustainable to build a long-term prosperity. It's going to take a different growth model, different environment practices, some different approaches. So I think getting it done right is more important than whether it's 7 or 7.5."
 
　　Paulson stressed that China's new leadership must understand both the importance of the private sector 11 and the need for reform generally. He also points out that the economic reforms in China need to address the major environmental issues stemming from rapid urbanization, plus social issues due to migration 12, as well as an overhaul 13 of capital markets by opening up the private sector.
 
　　For CRI, I'm Xiao Hua.