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China to Drive Asian Growth: Expert

China will help maintain Asia's ongoing economic growth despite an expected global economic slowdown, according to a leading economist.

Deutsche Bank Group Chief Economist Norbert Walter said the global economic upswing was slowing, particularly in the United States, which he blamed on higher interest rates and oil prices, and stagnating house prices.

However, he added that economies in Asia in general, particularly in India and the Chinese mainland, should be able to maintain their growth because of increasing intra-Asian trade.

Walter made the remarks during a seminar in Shanghai yesterday, which was organized by the city's European Chamber of Commerce in co-operation with the Austria Consulate General, the China-Italy Chamber of Commerce, the German Chamber of Commerce, the Irish Business Forum and the Norwegian Business Association.

Walter said: "The question of whether there will be a soft landing (of the economy) in China in 2007 can be answered simply there will be no soft landing. There will be no hard landing either there will be no landing.

"If you look at the world economy over the last 12 years, Asia has towered over everyone else," he said, adding that he expected this trend to continue next year.

Hong Kong, Taiwan, Singapore and Malaysia were likely to be affected by the expected downturn, which Walter said would be the "end of the longest-ever recovery of the world economy.

"In some areas in Asia there's a dependency on the United States and we should not overlook that," he told delegates.

Walter pointed out that this dependency was largely manifested in the IT industry, "where a number of regions are the workbenches of the United States."

While some areas will suffer from a downturn, the Chinese mainland and India "can find other sources of demand to compensate for the reduction of import demand in the United States.

"Intra-Asian trade will increase and stabilize the Asian economy.

"I believe its economy is moving more independently because of the increase in intra-Asian trade."

He said intra-regional trade has recently been expanding rapidly and now accounts for more than 40 percent of Asia's total trade volume.

Walter is also the chief executive officer of the Deutsche Bank Research think-tank, which covers a range of issues ranging from economic forecasting to sector analysis.

He told the seminar that it was now vital for the Chinese authorities to try to improve the social and economic environment in rural areas in order to secure the country's long-term growth.

"It is very obvious that there is a big need to really focus on that in order to avoid social disruption and to avoid even more massive migration, by things like educational efforts and transportation provision," said Walter, formerly a professor at the renowned Kiel Institute for World Economics.

"This will be a very tough task not just for the central authorities in Beijing," said Walter, stressing that provincial administrations also have a major role to play.

He stressed China's rural sector and its development hold the key to the nation's medium and long-term growth.

"More moving of investment into the central and western areas is necessary to avoid the overheating that is happening in some parts of the eastern areas, as shown by real estate prices in places like Shanghai.

"The untapped potential of the rural sector is the source of growth for China in the medium and long-term.

"The very fact we still have so many people living on the farm in rural areas means there is a resource reserve that can be tapped."

(China Daily August 23, 2006)

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