Wealthy economies must promote growth

By Lan Lan and Chen Weihua

A view of the Huaneng Gaobeidian Thermal Power Plant in Beijing. Developed economies need to invest heavily in infrastructure and clean energy to off set an expected downturn in East Asian economic growth, according to the World Bank's chief economist. Justin Yifu Lin. [Photo / Bloomberg]

Growing income gap poses tough challenge to China's growth rate

NEW YORK - Developed countries need to step up and invest heavily in the infrastructure and clean-energy sectors to offset the expected downturn in East Asia's economic engine, said World Bank Chief Economist Justin Yifu Lin.

China set an annual growth target of 7 percent over the next five years, which is lower than the 7.5-percent target set in the previous five years.

Lin spoke to China Daily after a speech to the Council on Foreign Relations in New York on Monday, and said that environmental protection issues and China's yawning income gap pose tough challenges to the nation's growth rate.

Though steady growth in East Asia has been an important force in the world economy over the past two years, Lin said during his speech that "East Asia now faces some concerns about inflation. The region's growth may have to slow a bit and that's another reason why we need to look beyond East Asia".

"If we want to generate enough demand for investment in the world, we need to have growth in high-income countries, as well as other regions," Lin said in his speech.

He said global GDP is projected to grow at 3.3 percent in 2011, 0.6 percentage points lower than in 2010.

A major challenge for the global recovery, he said, is the excesses in housing and manufacturing sectors in the developed countries. High unemployment rates are also a reflection of under-utilization within the sectors, he added.

Lin said nations must also tackle heavy capital inflows, which may lead to the emergence of unsustainable bubbles in the equity and real-estate markets for a number of middle-tier countries.

He advised the wealthier countries to invest their under-utilized capacity to create more jobs and stimulate demand to mitigate risks and achieve sustainable growth.