TOKYO (Reuters) — China is likely to have annual growth of at least seven per cent over the next five years as it re-balances its economy to lift domestic demand, the Asian Development Bank's new chief economist said on Thursday.
Shang-Jin Wei, who began the ADB post in August, said China's rigid labour market is a greater "source of concern" than a slowdown in the growth rate for the world's second largest economy.
His remarks, in an interview with Reuters in Tokyo, came a week after the Manila-based regional lender left unchanged its 2014 and 2015 growth forecasts for China, which expanded 7.7 per cent last year.
The ADB sees growth slipping to 7.5 per cent this year and 7.4 per cent in 2015.
Beijing is aiming to grow the economy by around 7.5 per cent this year, but the run of underwhelming data so far has led many analysts to predict it may fall short of that target.
"In my assessment, over the medium term, it's very unlikely for the Chinese growth rate to fall below seven per cent," Wei said, adding that the medium term was "five years or could be more."
The economist, who was born in China and is now a U.S. citizen, said the Chinese economy "is making a transition to a new growth model at a relatively fast rate." China is much less reliant on exports than it used to be, he said.
However, China's labour market is "something to watch out for," Wei said. He said that Chinese companies are making "very high" contributions for pensions and health care, and "something needs to be done to reform that." There should be a social safety net but "you want to provide it in a way that will not affect workers' long-term employment prospects," he added.
On monetary policy in advanced economies, Wei said the Bank of Japan's massive stimulus is having a positive impact on regional economies as it helps revive the world's third-largest economy while partially offsetting the impact from the U.S. ending its tapering.
"We see countries are better prepared this time than last time. I'm not saying (there's) no risk, there is always a risk especially if the U.S. interest rate goes up by bigger amounts and early," Wei said.
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