Spotlight: Foreign experts confident of China's long-term prospects, rejecting blame for causing economic reversals

Foreign experts on China's economic development have expressed confidence in China's long-term growth potential after the steep fall of its stock markets on Monday and Tuesday, dismissing claims that China is the cause of economic reversals.

Recent volatilities of China's stock markets and currency depreciation are "natural" as China meant to transit from an export-driven manufacturing economy to an economy based on internal consumption, saving and investment, Chairman of the U.S.-based Principal Financial Group Larry Zimpleman said in a recent interview with Xinhua.

Zimpleman, also chief executive officer of the company, said that he remains confident about China's economy as the government has long been "trying to re-engineer the economy."

"This is a difficult transition," he said. "The natural consequence of that is there is going to be volatility."

It is "the right thing to do" and "the right shift of the economy" as it will make China's development more sustainable and depend more on China's domestic market instead of the overseas one, Zimpleman said.

Talking about the recent rising concerns about the Chinese government's intervention in the stock market and the depreciation of the Chinese currency, the RMB, against the U.S. dollar, Zimpleman said those interventions are "not unusual for a government" and "perfectly logical" as the government has a role to support the economy and manage the capital market and exchange rate.

"The United States government through Federal Reserve has been involved into the capital market for the last seven years. They were influencing single interest rate, pushing interest rate down," said Zimpleman, adding "the European Central Bank in Europe is doing the same thing."

"Every government to some extent is watching its currency. And in fact if they get outside what they think it is reasonable area they start to take steps to manage that," Zimpleman said.

"At this point I would say I don't see anything that causes me great concern" as the actions taken by China's central bank are "almost like using a tire pump to push a little more air into the tire because the tire was going to be a little bit flat," Zimpleman said.

Although China wields a strong economic influence on the world, China is not to blame for the current economic reversals, Gustavo Girado, director of the Asia and Argentina consultancy, said in a recent interview with Xinhua.

"I do not believe that all of these problems are due to China's economic reality. The global economy is undergoing a time of important adjustments, particularly in the European Union (EU) as it grapples with Greece's debt," he said.

Furthermore, "the highly anticipated interest rate hike in the U.S. set to happen around the end of the year will see capital flow to the U.S. from emerging economies, which will only quicken a lack of confidence in weaker markets," Girado added.

China is highly important in this context although its recent macroeconomic results and industrial activity are no longer ideal to prop up global economic activity, the analyst said.

"Low growth in China will result in low demand for commodities and will lead international prices to trend downward. As China is focusing on stimulating internal growth and less on fostering investment, its demand for raw materials, such as iron ore and copper, will drop, thereby impacting major emerging markets, like Brazil," said Girado.

He called for clear political measures to be taken to avoid a risk of this kind of crisis.

He said Beijing was undergoing a special moment as it decided the country needs to grow more slowly and stimulate internal consumption, which has led Chinese exports to grow far more slowly.

"Decisions such as lowering exports have a rapid impact on the world, which has been manifested in the sharp drop in Chinese stock exchanges, as investors realize they must lower their expectations of future profits," he said.

Experts in London believe that worries over the current setbacks of the Chinese equity market and China's economic outlook are exaggerated and that there is still long-term growth potential in the cards for the country.

Mark Williams, chief Asia economist at Capital Economics, was critical of investors' reaction to China's equity bubble in an analysis piece.

"Investors are overreacting about economic risks in China. The collapse of the equity bubble tells us next to nothing about the state of China's economy," he said.

"Falling equity prices in China shouldn't be a cause of trouble in the wider economy or abroad. Only one in 30 people in China owns equities. Just 2 percent of China's equities are owned by foreigners," he said.

Anatole Pang, sector lead for financial and professional services at the China-Britain Business Council (CBBC), said in a statement that despite all the turbulence, gloom and speculation, "we are learning very little new about the China story from what we knew before."

Pang believed that the devaluation of the RMB was quite natural, but that it will of course have a knock-on effect as people want to exit RMB assets.

"China is entering a sustained period of slower growth -- the so-called 'new normal.' British companies need to plan for this, but equally recognize it is reduced growth in an enormous market, with ever increasing opportunities for British companies across many sectors," Pang said.

Williams said that policymakers in China also have the "luxury of still being able to loosen policy if necessary", unlike their counterparts in many developed economies.

"Indeed, the government's own budget projections point to a sizeable boost from government spending over the second half of the year," he said.

Kamel Mellahi, a professor at Warwick Business School, believed the depreciation of the RMB was no great cause for concern.

"With 4 trillion U.S. dollars of bank deposits, China still has the financial firepower to alleviate market pressure," Mellahi told Xinhua, saying the government's reluctance to initially interfere aggressively to calm the market suggests that China has finally decided to let the market forces play a bigger role in deciding the value of the currency.

"China is concerned that aggressive interference in the market may sow the seeds for future problems, especially worsening the credit growth which is already high and could go out of control," Mellahi said.

Stephen Phillips, chief executive at CBBC, was optimistic about China's growth.

Given the background of China's "new normal" in economic evolvement, Phillips suggested that increasingly, companies need to look at China with "more granularity," as there are significant differences in economic performance between provinces and cities, as well as in different sectors. Endi