China, US have ‘huge potential’ for economic co-op

WASHINGTON – China and the United States have “huge potential” for economic cooperation, which should be more market-oriented, a leading economist of a Washington-based think tank said.

“The latest ten to twelve years demonstrated that the potential is huge, and lots have been realized. The liberalization that has occurred has allowed the trade flow to increase dramatically in this direction,” Nicholas Lardy, a senior fellow at Peterson Institute for International Economics told Xinhua in a recent interview.

Trade between China and the United States has a solid development base. China’s trade with the United States, the country’s second largest trade partner, rose to $446.7 billion in 2011, a 15.9-percent growth over 2010 and a sharp increase from the 80.5 billion ten years ago.

Lardy said that while the global economy is facing intensified downside risks, it is of great importance for China and United States, the two biggest economies in the world, to further expand bilateral economic cooperation.

The two sides need more coordination as they act “in parallel” against the risks, he said, adding that both China and the United States should adopt appropriate policies to sustain economic growth to help the world economy mitigate the negative impact of the eurozone sovereign debt crisis.

Lardy also argued that the economic cooperation should be more “market oriented” rather than government-promoted. The increase of US exports to China was mainly driven by market, Lardy said, “because China is growing so fast, its demand is high, some of the demand is satisfied by imports.”

“Let the market play the role,” he stressed, because “when this happens, the trade expands.”

China is currently the third largest exporting market for the United States. China’s import from the US surged to 122.1 billion in 2011, up 19.6 percent from a year earlier, despite the faltering world economy.

Talking about the US plan to double its exports by the end of 2014 from the basis of 2009, Lardy said his country should export more high-tech products to China.

Lardy has done a long-time research on China’s economy and is called “everybody’s guru on China” by US National Journal. He has written or edited a number of books on China.

In his latest book, which is entitled “Sustaining China’s Economic Growth After the Global Financial Crisis”, Lardy said China has emerged successfully from the global financial and economic crisis but must undertake fundamental reforms to sustain its economic growth and help the rest of the world recover.

During the interview, Lardy noted that China needs a consumption-based, rather than an export-led model of growth. “China needs to encourage other growth sources than exports,” he said.

He suggested Chinese policymakers increase expenditure on social welfare programs to stimulate domestic demand. “The potential for generating more growth from consumption is enormous for China,” he added.

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