Incoming World Bank chief economist Justin Lin Yifu has advised that China should boost the development of smaller banks and credit guarantee firms, whose financial help will allow labor-intensive enterprises to create more job opportunities for the country's low-income working force.
Lin, a Chinese professor, said at a panel discussion of the Beijing delegation to the 11th National People's Congress on Thursday that currently China's financing institutions are composed mainly of big banks or the stock market, which to some extent, has hindered the development of small and medium enterprises.
Meanwhile, the country should raise its low resource tax rates and fees so that resource-based industries shall carry the same amount of risks that justify their abnormally high profits.
The existence of monopoly industries in China has also contributed to the ever prominent problem of widening income disparity, the Beijing News quoted Lin as saying.
Thirty More Years of Fast Growth
China's economy will continue growing quickly for up to another 30 years thanks to its vast domestic market and foreign investment, Lin told reporters at a press conference on Friday in Beijing.
"For the prospect of China's development, as you know I'm an optimist and I believe China is absolutely likely to see high-speed growth for 10, 20, or 30 years," the AFP quoted Lin as saying.
"There is quite a large amount of room for China's industry to be upgraded and China also has a vast domestic market.
"Meanwhile, foreign investors, either taking China as a manufacturing base for exports or a market that keeps expanding, will (continue to) come to invest in the country."
Lin argued that interest rate hikes were a better tool than reserve ratio rises for China.
"I am personally in favour of using interest rate policies (more often)," said Lin.
China's consumer price index (CPI), a major inflationary barometer, rose 7.1 percent year-on-year in January, its fastest pace in 11 years. Economic growth has been rising at double-digit pace for a fifth straight year in 2007.
In a bid to cool the economy, the government has raised the amount of money which banks must keep in reserve 11 times over the past 14 months and hiked interest rates six times in 2007.
He explained that the problem with reserve ratio hikes was that small and medium-sized enterprises -- the main providers of jobs -- were often the first to lose access to credit.
Lin, the founding director of the China Center for Economic Research at Peking University, was named last month as the World Bank's next chief economist, and will take over the position in May.
He was speaking on Friday on the sidelines of China's parliament, the National People's Congress, of which he is a delegate.