by Xinhua writers Xu Duo, Xie Peng
BEIJING, Jan. 3 (Xinhua) -- The current global economic recovery is "sustainable," UBS global chief economist Larry Hatheway said in a recent interview with Xinhua.
Policies in countries and regions including the United States, Europe and China have injected initial impetus to the good momentum of recovery, Hatheway said.
In the United States, the world's largest economy, the combination of policy stimulus and adjustments in the private sector appeared to be stabilizing the economy and the labor market, he said.
"With private consumption spending stabilizing and signs that the worst of job losses has been over, the country has witnessed amore durable recovery," he said.
"We expect employment gains will underpin household income formation and modest consumer spending in the U.S. by early 2010,"Hatheway said, adding that the outlook for western Europe was similar.
"In China and much of the non-Japan Asia, growth is much more robust, by courtesy of massive stimulus, undervalued exchange rates and sound household and financial sector balance sheets," the economist said.
However, Hatheway warned against a debt-driven U.S. growth.
"The world must wean itself off debt-driven U.S. growth," he said. "For China, Germany and Japan, this means finding growth alternatives to export and import substitution. China appears to be making some steps in the right direction, such as boosting domestic demand in 2009."
Speaking on the most important qualitative changes in the world economy, Hatheway said it has been those in the financial sector. "De-leveraging is a fact, and banks are unlikely to support soon the kind of credit formation of the past two decades."
Nevertheless, the economist said that the risk in the reform of the financial sector is that "the financial sector has become so encumbered by regulation that it was unable to serve the broader economy."
"There is need to establish mechanisms to ensure that the events of the past decade are not soon repeated, but the key will be finding the right balance between reform and the continued application of market principals to allocate savings and investment," he said.
In another interview with Xinhua, Wang Tao, head of China economic research of UBS Securities, said China's economy was projected to expand 9 percent or higher in 2010, thanks to recovered exports, booming investment and increasing consumption spending.
"In the wake of a drastic decline in 2009, the world economy will undertake a mild recovery in 2010, which will promote China's exports to grow in single digit," Wang said.
"This, coupled with a sustained strong growth of investment and rapidly increasing domestic consumption spending, will contribute to a 9-percent growth of China's gross domestic product (GDP) in 2010, or even higher," she said.
However, the economist warned against an overheated economy this year. "China should keep alert against over-rapidly increasing investment and asset bubbles. These are risks brought along by superfluous liquidity in markets."
Wang also stressed the importance of China-U.S. economic cooperation. "With huge cooperative potentials in the fields of new energy and technology, the world's largest developed and developing countries will by all means benefit from cooperation," she said.
