Interview: Soft landing possible in China with adequate reforms: Austrian expert

The Chinese economy is expected to see soft landing provided that adequate reforms are implemented, an Austrian expert has said.

It is positive that China is shifting in the direction of sustainable development and respecting environmental goals, Helmut Hofer, a senior expert in economics at the Institute for Advanced Studies in Vienna, told Xinhua.

Other important elements to its economic development include how the economy in general is growing, potential output growth, as well as short-term business cycle fluctuations, Hofer said.

Structural reform, especially cutting overcapacity, is necessary in the long run, he stressed.

Hofer lauded the shift toward greater domestic consumption, saying that this aspect of the economy has been relatively low in China in the past.

To what extent will consumption contribute to growth depends to a certain degree on whether China's social security system works in the future, he said. A good system would allow people to spend more, instead of saving too much money for the future.

Hofer also considered some of the smaller stimulus packages implemented by the Chinese government useful, particularly the investments in transport and equipment, which has unlocked growth potential.

He suggested the Chinese government be patient with structural reforms, which poses some risks, and also be innovative and try new things.

On the Chinese stock markets, Hofer attributed the recent turbulence to a speculative bubble in 2015 where asset prices were too high and overvalued.

The bubble was caused primarily by two issues, he said. One was an element of uncertainty over further development of China, particularly as relates to its transition from an export- and investment-oriented economy to one based on services and consumption. The other hinged on relatively slow growth of the world GDP.

Hofer said China should develop a more functional stock market, with increased emphasis on transparency that reduces uncertainty, for both domestic and foreign investors and observers.

While China has been very successful in its present transition process, the establishment of both sound financial and stock markets presents a learning curve, as has also been observable in the West, he noted. Endi