By Lu Hui
TIANJIN, Sept. 12 (Xinhuanet) -- Innovation and consumption are key drivers to boost the future economic growth when China is undergoing the economic restructure, said an expert on Wednesday on the sideline of the ongoing 2012 Summer Davos Forum in Tianjin.
John A. Quelch from China Europe International Business School said to Xinhuanet that it's right for China to chooses a path by transforming the economy from export-led to more balanced, consumption-led.
“The question is how quickly the transition will occur,” said Quelch, adding that some economists believe that given the lack of health care, safety net and pension system, many Chinese will still go on saving for a rain day, and they will not step up for consumption. "This will be a big question hanging over Chinese transition," he held.
“There has to be a lot of growth coming from domestic consumption, but also from the development of service sector,” Quelch added.
On how to stimulate consumption, Quelch said there are three approaches any government can take. “One is to stimulate spending, such as infrastructure projects and the second one is to reform fiscal and tax regime, reduce taxation either on goods savings, services, income of lower levels in order to give more people more money to spend."
"And thirdly, the government will create a level playing field for small and medium-sized enterprises, as they can deliver more goods and choices to Chinese consumers, will encourage more consumption by Chinese consumers,” he said.
Quelch acknowledged the importance of the service sector. “It’s not so easy to develop the capability of service sector as it requires different mindset to be delivering services than to be manufacturing products in the factory line,” Quelch said.
Acknowledging that it’s hard for China to quickly fill the innovation gap with the U.S., Quelch is very confident that Chinese entrepreneurship will face up to the innovation challenge.
"The research and development budget will be higher this year than any other time in China’s history," he stressed, adding that the U.S. has been spending 3 percent of its GDP on research and development for more than 40 years. "So the Chinese have to be patient about that," he suggested.
Quelch stressed the importance of popularizing the innovation products and services by saying that there is already a lot of tremendous innovation that’s been patterned, but people have yet to fully appreciate how to successfully commercialize them to provide affordable and understandable value to end consumers.
“Someone once famous said the future has already been invented, and you can’t buy it at retail,” Quelch commented.
Asked about the outlook about China’s future economy, Quelch said he is optimistic of China making a great contribution not only to the world economy but also to social value around the world as well.
“China has a fantastic record of last 30 years, it’s probably the most substantial economic transformation in the human history,” Quelch noted, “It would be unfair to expect China to replicate in the next 30 years what has been achieved in the last 30 years.”
“What makes me optimistic is that young people in China are very committed to doing the best they can do for their country and their family,” he added.
Themed "Creating the Future Economy", the three-day forum, featuring interactive programs on issues including the euro crisis, China's future economy and global food security, has attracted some 2,000 participants from 86 countries and regions.