Treating Economic Sub-Health Conditions

Author: Fan Gang, President of CDI

Editor’s Note: at Session 24 Global Economy: Moving Beyond Sub-Health, Fan Gang said that high economic growth rate is unhealthy and China would like to lower its foreign reserves gradually.

High economic growth is not necessarily healthy as China currently deals with the consequences of overheated economy in the past. China's central bank is also reluctant to hold $4 trillion in foreign reserves, hoping to lower it to the desired two trillion, yet the central bank does not want to see it happen overnight.

China's economic growth rate in 2007 was 14% and it returned to 12% after the crisis with the influence of stimulus policies. This kind of overheated growth is unhealthy. We are now actually dealing with the consequences of overheated economy. As long as the economy is stably growing without further recession, the current growth rate is fine.

Zombie businesses are already dead and need to be removed. Some debt-to-equity projects are still in progress and the closure of certain companies are also under discussion. These businesses are trying to find a way to solve the problem of layoff or unemployment, but no tangible results have been produced by now. Zombie businesses now still exist and are holding back the economy but the negative effect is not as serious as before.