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by Xu Haijing
CANBERRA, Oct. 17 (Xinhua) -- Despite sluggish world economic recovery, Chinese economy is unlikely to have a sharp showdown. Australia will continue to benefit from its economic relations with China through the Free Trade Agreement (FTA) and Chinese investment, said James Laurenceson, Deputy Director of Australia-China Relations Institute (ACRI), University of Technology Sydney.
Laurenceson, an Australian economist specialized in Chinese economic research, made the points in a written response to Xinhua's questions.
Commenting on the slow and unbalanced recovery of world economy, Laurenceson said part of the reason is that countries are lack of willingness to conduct structural reform.
"We've seen countries make aggressive use of macroeconomic tools such as monetary and fiscal policy to stimulate demand, but progress on reforms that boost productivity has been less," he said.
"Embarking on structural reforms with the same enthusiasm as macroeconomic policy easing is the key."
Laurenceson said Chinese economy has been undoubtedly affected by the sluggish world economy. Recent data showed that Chinese exports has been down year-on-year.
"That said, China's exports are falling at a slower pace than global imports. In other words, China is still gaining market share overseas," he said.
"And more importantly, China's growth has been driven by domestic demand since 2010. For that reason, I don't expect China's growth will slow sharply, even with a sluggish global economy."
Anatole Kaletsky, chief economist and co-chairman of economic consulting firm Gavekal Dragonomics, recently wrote that even as the pace of growth slows, China is contributing more to the world economy than ever before, because its gross domestic product (GDP) today is 10.3 trillion U.S. dollars, up from just 2.3 trillion in 2005.
"Simple arithmetic shows that 10.3 trillion dollars growing at 6 percent or 7 percent produces much bigger numbers than 10 percent growth starting from a base that is nearly five times smaller," he said.
As for the economic situation in Australia, falling export prices have meant that Australia's national income is also falling.
"Fortunately, Australia has a flexible exchange rate and this has already adjusted to offset some of the negative impact," Laurenceson said.
"Just as in other countries, Australia needs to focus on productivity enhancing measures. The China-Australia FTA is one example of a policy that will boost productivity in both Australia and China," he said.
Laurenceson said Australian economy is in transitions away from the mining boom, and it needs demands from China that will sustain the growth of other sectors of its economy, from agriculture to services. In addition, Chinese investment can help unlock the potential of these other sectors.
"China will remain Australia's most important economic partner," he said.
From a global perspective, multilateral trade liberalization is ideal because it promotes a win-win for all involved. However, the benefits of the Trans-Pacific Partnership (TPP), for example, are limited by the fact that China and India are not included.
"In contrast, a Free Trade Area for the Asia-Pacific would be hugely beneficial," he said.
