Leading economist says stimulus won't ease economic woes

Wu Jinglian, one of China's leading economists, criticized the attempt to use financial stimulus to boost the speed of growth as a wrong method to ease the nation's economic woes.

What he calls an "institutional barrier" is the main factor in the slowdown in China's overall rise in productivity and failure to meet the demands of its newly rich, middle-class citizens.

Even worse, in some key areas, the reform to remove the institutional barrier has been slower than it should be, despite the current leadership's strong determination expressed in its reform programs adopted since 2012, he said at a scholarly forum held today at Tsinghua University, Beijing.

Wu is a researcher at the State Council Development Research Center. He is one of the veteran economic advisers to the Chinese government from the early days of the nation's economic reform. His opinion on the current economic policies is important in the run-up to a top leadership meeting, scheduled for later this month, to map out China's economic program in the next five years.

Using financial stimulus to buoy up China's GDP growth, Wu said, is to deal with the nation's long-term problems by use, in a mistaken way, of the Keynesian solution for short-term problems.

That is also why the effect of financial stimulus has diminished to such an extent as to be nearly useless now, when it has incurred huge debt for local governments and companies. Dishing out more financial stimulus to the economy is a wrong and unsustainable solution for China, he said.

Wu urged the government to act more resolutely in reforming China's financial system, fiscal management, price and pricing system, State-owned enterprises, building up tariff-free zones and further opening up to global investors.