New | China strong enough to face reform risks, experts say

The Chinese economy is growing strongly enough to withstand the potential risks from further financial market and foreign-exchange liberalisation, experts said yesterday.

While some market players cast doubt on whether China could sustain a serious reform in key areas, worrying that a freer currency might cause increasing capital outflows amid a depreciation, bankers and scholars told investors at a forum that a hard landing for the economy was unlikely.

"If the liberalisation takes place too fast, it would increase risks in the economy," said Fan Gang, a professor of economics at Peking University and former adviser to the People's Bank of China. "So far, we see the mainland's growth story remains intact and attractive, with a growth rate of between 6.5 per cent and 7 per cent in the long run."

Central bank chief Zhou Xiaochuan vowed to ramp up its reform programme aimed at internationalising the yuan during a conference on Sunday and he flagged that the country could achieve a freely traded currency this year.

The reforms include introducing a deposit insurance scheme and stock-trading links between Shenzhen and Hong Kong this year.

Some economists, including renowned academic Yu Yongding from the Chinese Academy of Social Sciences, hold a bearish view that Beijing's dismantling of its control over short-term cross-border capital flow could result in disastrous consequences, as historical experience has shown that whenever interest rates in the United States rise, there will be massive capital outflows from developing countries.